Market analysts are advising investors to stay away from the sugar stocks as the sector performance is expected to be bleak on the stock markets in the short term.

Most sugar stocks crashed on Monday after India's largest sugar producer by volume, Shree Renuka Sugars announced that it has incurred a net loss in the second quarter of the financial year due to foreign exchange losses.

Shree Renuka announced its quarterly results after the trading hours on Friday. The company reported a consolidated net a loss of Rs 615.80 crore for the quarter ended September compared with a net profit of Rs 128.10 crore. It suffered a loss of Rs 569 crore in foreign exchange market.

Even as the company's loans are for 2013, it chose to include the losses in the second quarter following its accounting norms.

The shares of Shree Renuka Sugars fell 26% to Rs 38.40 while Balrampur Chini Mills closed ended 11% down at Rs 45.20 and Bajaj Hindusthan ended 6% down at Rs 29.70.

The industry is also facing difficulties due to the increased prices of sugar cane in the market. Analysts say that increase of sugarcane prices in major growing states like Uttar Pradesh has increased input costs for the sugar firms. The authorities in UP have announced an increase in the state's benchmark sugarcane rate by Rs 40 per quintal to Rs 230-240 for the current crushing season.