Textile stocks in demand; Nitin Spinners, Vardhman, RSWM rally up to 14%

The signing of free trade agreements (FTAs) with multiple countries, and stability in export incentive policy presents an opportunity for Indian exporters to gain global market share.

Shares of textiles including garments & apparels were in demand and trading higher by up to 13 per cent on the BSE in Wednesday's intra-day trade on the back of heavy volumes as the industry is on the path to recovery and the management is optimistic about the future.

Among individual stocks, Nitin Spinners hit a new high of Rs 358, on surging 13 per cent in intra-day trade on the back of four-fold jump in its average trading volume.

RSMW soared 14 per cent to Rs 198.45, followed by Vardhman Textiles (10 per cent at Rs 422), Nahar Spinning Mills (9 per cent at Rs 296.75), Donear Industries (7 per cent at Rs 103.80), Ambika Cotton Mills (7 per cent at Rs 1,675) and Indo Count Industries (7 per cent at Rs 291.40). In comparison, the S&P BSE Sensex was down 0.11 per cent at 65,858 at 12:02 PM.

The government initiatives like signing of free trade agreements (FTAs) with multiple countries, stability in export incentive policy provides an opportunity for Indian exporters across the textile value chain to gain market share in global textile trade.

Textile industry, especially the cotton yarn, has faced challenges during the last several months. Cotton prices have remained relatively stable throughout the year and the gap between international prices has significantly narrowed in the last 6 months.

The cotton prices for the new season have been adjusted and now hovering around Rs 56,000 per candy. This stabilization process allows us to plan more confidently for the future. Furthermore, utilization in the spinning industry is approaching normal levels and there are signs of improvement in demand. Reasonable cotton prices, increased retail consumption and reduced downstream inventory have contributed to this positive trend, the management of Nitin Spinners said in a Q2 conference call on November 10.

India's yarn utilisation levels improved steadily from 60 per cent in Q3FY23 to ~85-90 per cent currently. Recovery could also be gauged from the fact that India’s yarn exports which had fallen to nearly 30 million kgs in the month of July 2022 has reverted to back to its long-term average run-rate of 90 million kgs in June 2023. With most of the negatives behind us, analysts at ICICI Securities expect Nitin Spinners could witness gradual improvement from H2FY24 onwards. The stock however, trading around brokerage target price of Rs 360 per share.

There are four major segments in the textile industry which are home textile, knitting, denim and weaving. Home textile in terms of consumption has been doing reasonably well for the last couple of months and they are practically running the full capacity for the last six months or so, which means their demand has started improving and this is one segment, the management of Vardhman Textiles said.

Of course, the prices of yarn are not increasing or the price of home textile may also be under pressure but at the same time, at least their utilization for the Indian mills are surely better, the management said.