TEXTILE SECTOR – WELL-SUITED!

about 2 months ago
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Yesterday Century Textiles had hit a new high at Rs.826.55 and today also it is in the green. Almost all the textile stocks have been rallying in the green over the past few weeks – Siyaram Silk, RSWM, Dollar Inds, Vardhman Textiles, Himatsingka, Trident, Indo Count, Nahar Spinning, Arvind, Bombay Dyeing, Raymond.

And all over, we have people asking us whether textiles will be the renewed sunrise sector to follow? Well, this is undoubtedly one of the most favoured sectors currently and there are short term reasonings and long term reasons too.

Short term triggers:

The market is betting currently on the earnings season and is certain that most textile stocks will post excellent numbers as apart from the lower base effect, the demand has seen an uptick.

The escalating scenario of tensions between India and China has led to speculation that the Indian textile sector will be the beneficiary. India’s textile exports to USA have gone up over 45% in 2021 till date and the hope is that exports will increase to other countries too.

With world economies opening up, a lot of pent-up demand is seen coming in for garment apparel and home textile products as retailers are seen building up stocks.

Long term triggers:

The sector is expected to show double-digit growth on the back of growing domestic as well as export demand and this is the cyclical growth too – the sector has been down in the dumps for many years and cyclically, its time for it to bounce back with vigor.

Long term recovery is seen as the Govt too has given the sector many sops to pump up growth as it’s a labor-intensive industry. The Budget has given sops like hiked import duties on textile products, ease in setting up textile parks, allowing 100% FDI under the automatic route in the sector and many more. All these collectively as expected to give an impetus to growth.

Wazir Advisors, in Indian Textile and Apparel Industry annual report 2021 said that the global apparel market shrunk 22% in 2020 at $1280 billion but with consumption coming back, it is expected to touch $2007 billion by 2025.

Companies are doing well with majority companies operating at much higher (not yet 100%) capacities and it is expected to only up as the year progresses.

The Trump administration expanded economic pressure on China's western region of Xinjiang, banning cotton imports from a powerful Chinese quasi-military organization that it says uses the forced labor of detained Uighur Muslims. This region produced 30% of China’s cotton and this ban is now forcing China to allow more imports that usual this year. This is only expected to go up further as and when the tensions escalate, putting India’s textile sector in an advantageous position.

Indian textile sector needs to play its cards well. We, as a country have abundant labour, no dearth of raw material and competitive labour and power cost; we have it all to usurp the crown from China but will the leadership work as quickly?

Our Editor, Mr.SP Tulsian’s picks in the sector are Century Textiles, Siyaram Silk  and Sportking India.

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