Are textile stocks hanging by the thread of optimism?

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could benefit Indian RMG exporters like Gokaldas Exports Ltd, K.P.R Mill Ltd, and Arvind Ltd. Unsurprisingly, shares of these stocks touched new highs, reflecting the Street’s optimism. Sentiment boosts aside, grabbing a meaningful chunk from Bangladesh’s textile export pie may not be easy.

In fact, some analysts point out that the gains for Indian textile companies from the Bangladesh crisis could be temporary in nature because of the difference in product portfolio and the country’s pact with the European Union, which puts it in a relatively stronger position. Moreover, the political turmoil in Bangladesh may be short-lived. Given that RMG exports form the backbone of its economy, Dhaka is likely to stabilize the situation swiftly.

And while Indian textile companies may have the production muscle to meet increased demand, they still face challenges in terms of cost competitiveness. Read this | As Bangladesh descends into chaos, India’s trade and security hang in balance After a challenging FY24, marked by inventory issues and weak demand, signs of recovery are beginning to emerge for Indian textile firms. "Our analysis of top 20 listed textile stocks shows that in Q1FY25, year-on-year sales growth muted at around 4% due to weak domestic demand even as external demand prospects improved," said Aditi Gupta, economist at Bank of Baroda.

However, profit after tax and profit before interest, tax, depreciation and amortization, rose 25% and 14%, respectively, aided by a favourable base and volume led growth strategy adopted by companies, she added. For spinners, improved international and domestic demand, thanks to favourable Indian cotton prices, aided June quarter’s earnings. Liquidation of excess inventory gave volumes