Textile companies' stocks up as export demand improves

Textile stocks in the past month have rallied on the back of expectations of better profitability, following good export demand.  Depreciation in the rupee is helping exporters, while a better than expected crop of cotton is expected to result in lower prices. Lower cotton prices help companies to keep raw material cost under control.

Raymond’s stock since the start of September has gone up 33.4 per cent to Rs 254.50, while Alok Industries has moved up 25.6 per cent to Rs 7.98 per share. Arvind has gone up by 22.2 per cent to Rs 96.1 a share. During the period, the benchmark S&P Sensex has moved up by 8.7 per cent to 20,249.26.

“Since the start of this financial year till July, textile exports have gone up 12-15 per cent, due to revival of demand from major importing countries like the US and euro zone. Also, demand has gone up from South American countries and China. The rupee has also depreciated, which made Indian products competitive,” said D K Nair, secretary general of the Confederation of Indian Textile Industry.

Cloth production has been marginally higher this year during April to July compared to last year, at 21,039 million sq meters compared to 21,012 mn sq meters in the same period last year.

This year, cotton production is expected to be at an all-time high of 40 million bales (a bale is 170 kg).

“Most textile stocks which are in exports have seen their stock price move up, owing to the expected positive impact of rupee depreciation,” said Bharat Chhoda, assistant vice-president, research, with ICICI Direct.

The rupee depreciated by 5.4 per cent in the September quarter to 62.61 a dollar; it had hit an all-time low of 68.83.

“The industry has witnessed a good September quarter and is expected to post better profits, mainly due to rupee depreciation and good export demand. Cotton prices are a bit on the higher side at the moment but it is expected to move down in the coming months due to bumper production,” said Rahul Singh, a textile analyst at Karvy Stock Broking.