Trade Deals Boost Indian Textile Stocks; Exports Expected to Rise
India's textile sector is witnessing a strong rally this year, driven primarily by the Free Trade Agreement (FTA) with the UK set to take effect this month, negotiations with the European Union (EU) reaching the final stage, and a potential trade deal with the US. These agreements are expected to boost Indian textile exports and enhance competitiveness in the global market.
Indian companies supplying products such as T-shirts, bed linen, and towels to global retailers like Walmart and Tesco are among the top performers in the stock market. An equal-weight index of eight major textile exporters tracked by Bloomberg has recorded a gain of over 30% this year, contrasting with an approximately 8% decline in the NSE Nifty 50 index during the same period.
Pawan Bharadia, Co-founder and Chief Investment Officer at Equitry Capital Advisors, believes there is a significant opportunity for Indian textile companies to expand their global market share. He anticipates a re-rating of the sector's valuation due to improved tariff structures and new export avenues. Shares of SP Apparels, a company held in his portfolio, have surged nearly 60% this year.
Experts suggest that India could also benefit from the global strategy to reduce sourcing reliance on China and certain other Asian nations. Driven by this outlook, major institutional investors like SBI Funds Management and Quant Mutual Fund have increased their stakes in several textile companies in recent months.
Shares of Arvind Limited have risen by approximately 74% this year, while Indo Count Industries has seen a gain of around 54%. Analysts at Motilal Oswal believe that major Indian textile exporters can expand their market share in the coming years by capitalizing on better order visibility and rising demand from global brands. Although India's share in global textile trade currently stands at around 4%, the government aims to grow the industry to $350 billion by 2030. Analysts believe that achieving this goal will depend on increasing production capacity, attracting new investments, and ensuring a steady rise in export orders.
