In last few quarters the Indian equity market has given spectacular returns. Most of the sectors barring the few have generated returns in such a short period of time that they have not generated in decades - one of them being textile sector. In last one year the average return generated by them is in double digits. Our analysis of share price of 200 odd textile companies shows that on an average they are up by 148 per cent from their recent lows. Shares of companies like Digjam and Adinath textiles are up by whopping 3456% and 4804% respectively.
Most of the investors will assume that as rising tide lifts all the boat, better performance by stock market in general is helping these companies to show such performance. Nevertheless, some fundamental change has taken place in last one and half year that has led to some structural change that will help the sector to chart a different growth trajectory from here on.
Textile Sector in Brief
The Textile & Apparel (T&A) industry size is USD140 billion in India and it contributes around 5 per cent of India’s GDP. Exports make up 24% of the Textile sector and 12% of the overall export earnings of the country. The T&A sector is likely to witness 10% CAGR over FY20-26E to USD255 billion. The factor that will be helping the sector is first and foremost increased domestic demand due to rising per capita consumption of apparels. Second is work from home culture is likely to stay one or other form, which has led to increased focus on home improvement products. In addition to these robust government policies are acting as stimulants for the sector.
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