Shares of textile and garment-making companies surged in a weak market Tuesday fuelled by expectations that the turmoil in Bangladesh, a major textile exporter, could benefit the Indian industry.
Analysts said the upsides could be short-lived as it remains uncertain if domestic companies would benefit from the unrest in the neighbouring country.
SP Apparels, KPR Mill, and Gokaldas Exports rallied between 15% and 20% on Tuesday. The BSE 500 index shed 0.4%.
"Though textile stocks have gone up, we do not see any short-term benefits to these companies due to the political unrest in Bangladesh as we believe brands and retailers will wait and watch for the next two weeks to see if the situation," said Prerna Jhunjhunwala, vice president, Elara Capital
She said if tensions remain protracted, Indian firms may get incremental orders over the next six months or in the next season.
"In the shorter term, spinning and fabric supply companies that export to Bangladesh may see some disruptions in their order books," she said
Industry officials said it would be hasty to conclude that the textile business in Bangladesh would shift to India soon.
"Does the Indian textiles market have the production capacity, workforce, and raw material inventory to be able to match up to the production of the Bangladesh market?" said Rahul Mehta, chief mentor, Clothing Manufacturers Association of India (CMAI) . "We have very few factories which can pull off large-scale production. So, it is too early to form a concrete view of the possible gains or losses to the Indian markets."
So far in 2024, shares of the garment and textile companies have given returns between 4% and 56% as against the 15% gains in the benchmark BSE 500.
"The Indian government's moves to promote the textile industry combined with the current situation in Bangladesh could help the sector," said T Manish, research analyst at SAMCO Securities. Some of Samco's top stock picks in the sector are KPR Mills, Gokaldas Exports, and the Trident Group, which could gain 10-15%.
Jhunjhunwala said Arvind, Gokaldas Exports, KPR Mills, and SP Apparels might be the beneficiaries.
“While Indian companies may also not have the capacity to take additional orders right now, a visibility of orders can lead to capacity additions in the medium term, as raw materials sourcing would not be a challenge,” she said.
Source Name : Economic Times