Textile stocks bounce back on global recovery

Stocks of textile companies focused largely on exports has seen a steady rise in the last few days with the revival in global demand.

Demand from all customers

Home textiles used for furnishing residence, towels, bedsheets, pillow covers and table linens are being bought more often in the US as the fear of Covid pandemic subside with the launch of vaccine.

Moreover, consumers, who are working from home, get more time to spend on the aesthetics of their house and spending more on home textiles.

This apart, hotels and motels getting back on their feet after the Covid impact are buying more bed linen as customers have become more picky about the freshness of bed linen in Covid times.

Shares of Indo Court Industries gained six per cent to ₹132 on Monday, while Welspun India, which was trading near its 52-week high of ₹78 in last few trading sessions, closed down by two per cent at ₹68 on profit booking. Arvind was down two per cent at ₹54, but scored handsome gains of almost 60 per cent in last three months; and Trident jumped 87.5 per cent in last three months.

Most of the textile companies have registered a strong recovery in the third quarter of this fiscal and this expected to continue in the March quarter as the demand in the domestic market is also picking slowly.

Import duty may hurt

However, the import duty of 10 per cent on raw cotton imposed in the Union Budget will push up the cost of textile companies and impact their margins. The levy of import duty on cotton will push up cost of extra long staple cotton such as GizaCotton from Egypt and Supima Cotton from the US and makes India lose ground on premium textile exports. The Government has also proposed to set up seven textile parks under the 'Mega Investment Textiles Parks' over three years to make the textile industry become globally competitive, attract large investments and boost employment generation, said Manoj Patodia, Chairman of The Cotton Textiles Export Promotion Council.

The Budget has reduced the customs duty on caprolactam, nylon chips and nylon fibre and yarn to 5 per cent to encourage growth of the man-made fibre sector especially the MSMEs, he said.

Nidhi Marwaha, Vice President, ICRA, said notwithstanding the broader recovery, growth in discretionary spends and aspirational buying is likely to remain lower compared to other essential product categories such as active/lounge wear and affordable-to-medium value casual apparels.