Sugar shares, which have risen over 10 percent in August, will be buoyant in the near-term as lower output boosts prices but government intervention may cool the sweetener's rally and could spoil the party.
Sugar, which missed out on the commodity rally in 2007, has risen this year, helping sugarmakers such as Balrampur Chini and Bajaj Hindustan turn to profit in the last two quarters, after posting losses last year.
Prices of sugar may soar to over two-year highs as output in the year-ending Sept '09 may fall 37 percent, according to industry estimates, but the government, battling double-digit inflation ahead of federal elections, may intervene to keep costs down.

Dwarikesh Sugar has risen 42 percent in the month while Balrampur Chini and Shree Renuka Sugars added 10 and 7 percent respectively.

However, the Allahabad High Court, in July, raised this price to 125 rupees, which would be an additional burden to the firms, hurting their profitability.