Financial Daily from THE HINDU group of publications
Tuesday, Jul 13, 2004
Financial Daily from THE HINDU group of publications Tuesday, Jul 13, 2004 |
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Markets
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Stock Markets Textile stocks on upswing Jayanta Mallick
Kolkata , July 12 TEXTILE stocks have been a firm feature in recent times, but today major counters in the sector such as Arvind Mills closed at new 52- week high. The stocks of spinning mills and synthetic garment manufacturers also finished higher with increase in volumes. These stocks have received an additional buying trigger after the sector received a boost from the Budget proposals in the form of reduction in excise duty on cotton yarn. In Budget for 2004-05, the excise duty has been reduced from 8 per cent to 4 per cent, while that on cotton fabrics and garments has been lowered from 10 per cent to 4 per cent for companies opting to stay within the Cenvat chain.
The Budget has also exempted excise duties on all cotton yarn, fabrics and garment manufacturers who opt out of the cenvat chain. This effectively abolishes the duty on the entire cotton textile chain. This move will significantly improve the competitive position of cotton textile players vis-a-vis man-made and synthetic textile producers. According to analysts, the scrapping of excise on raw materials — fabrics — will help garment exporters in reducing prices by about to 3 per cent-4 per cent leading to better volumes. This is expected to accelerate capacity expansion plans in the garment industry. China, which is driving down prices in the run-up to the quota-free regime, will now have major competition from India. There is good news for domestic consumers too. Prices of branded garments are likely to come down marginally as garment producers can buy primary raw material fabric at 3 per cent-4 per cent lesser than the existing prices. The budgetary measures will positively impact bottom lines of apparel companies, market analysts pointed out. The prospects of growth after December 2004 (under new WTO regime without quotas) also makes the sector appealing for investors in the local textile stocks.
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