Explained: Why textile stocks are delivering up to 14% returns for investors on Wednesday?

Textile stocks rallied sharply on Wednesday after brokerages turned positive on the sector, citing improving global demand, favourable trade agreements and India's growing competitiveness in global apparel exports. Shares of Pearl Global Industries jumped nearly 10%, while Indo Count Industries and KPR Mill gained around 8% each. Welspun Living rose 5%, Gokaldas Exports advanced 4%, and Arvind climbed about 3%.

The rally follows fresh optimism from brokerages that India's textile exporters are entering a multi-year growth phase after several difficult years marked by weak global demand, supply-chain disruptions, and high inflation.

UK, EU FTAs seen as major triggers
Domestic brokerage Motilal Oswal believes the recently concluded free trade agreement with the UK and the proposed pact with the European Union could significantly improve India's export competitiveness.


The brokerage estimates India's textile and apparel exports could rise from about $194 billion to $350 billion over the medium term as tariff barriers ease and Indian exporters gain market share.

Among its top picks, Motilal Oswal prefers Indo Count Industries, where it sees around 39% upside, followed by Gokaldas Exports with nearly 36% upside. It has also maintained Buy ratings on Arvind, Pearl Global Industries, and Welspun Living, while remaining Neutral on KPR Mill, Trident, and Vardhman Textiles.

According to the brokerage, improving inventory levels in the US and Europe, easing inflation, and lower tariff uncertainty are creating a more supportive environment for textile exporters after several years of subdued demand.

India seen gaining market share
Emkay Global also expects India's textile sector to benefit from structural tailwinds.

The brokerage noted that India's share of global apparel trade has remained stuck at around 3-4% over the past 15 years but believes the industry is approaching an inflection point. It expects free trade agreements with key markets, a stronger domestic man-made fibre ecosystem, favourable tax policies, and a 7-8 percentage-point tariff advantage over China in the US market to improve India's competitive position.

Emkay said Indian manufacturers have successfully navigated disruptions ranging from the Covid-19 pandemic and the Russia-Ukraine conflict to tariff uncertainties, leaving the industry better placed to capture incremental global demand.

The brokerage added that the ongoing West Asia conflict could temporarily increase logistics and energy costs but expects margins to recover once geopolitical conditions stabilise.

Spinners also in focus
Apart from apparel exporters, Emkay remains constructive on spinning companies.

It cited forecasts from the US Department of Agriculture indicating that global cotton demand is likely to outpace supply in the coming season due to weather-related production challenges and lower reservoir levels. Rising cotton prices and stable yarn spreads are expected to support profitability for spinning companies in the near term.

Among individual stocks, Motilal Oswal expects Indo Count to benefit from growth in its utility bedding and domestic bed linen businesses, while Gokaldas Exports could gain from capacity expansion in India and better utilisation of its Africa operations. The brokerage also sees Pearl Global benefiting from capacity additions across India, Bangladesh, Vietnam, and Indonesia, while Welspun Living is expected to gain from stronger home textile exports as trade agreements take effect.