Textile stocks rally after US hikes tariffs on Bangladesh garments

Mumbai: Textile stocks jumped up to 9% on Tuesday after US President Donald Trump imposed 35% tariffs on garment imports from Bangladesh - one of the biggest exporters of garments to the US - effective from August 1. The move spurred optimism in Indian textile stocks, in anticipation that lower tariffs on Indian exports could lead to better prospects for these companies.

Analysts said a trade deal between India and the US could lead to lower tariffs, which may improve business for textile companies.

"The imposition of a higher rate of tariffs on key garment exporters like Bangladesh puts Indian textile exporters in a favourable position," said Kaustubh Pawaskar, VP - lead analyst (consumption), ICICI Securities (retail). "Any positive development in the India-US trade deal could result in further gains."


However, until the uncertainty over the deal persists, near-term volatility cannot be ruled out.

The stocks gave up some of the gains but still closed higher on Tuesday. Raymond Lifestyle gained 5%, while KPR Mills and Trident advanced 3.6% and 3.3%, respectively. Gokaldas Exports and Garware Technical Fibres rose 2.7% and 2.1%, respectively, while Welspun Living moved 0.6% higher.

"The 35% tariffs on Bangladesh and 36% on Cambodia and 40% on Myanmar-major textile exporting nations - may be favourable for India, as the expected trade deal between the US and India may include a lower tariff rate for India, which prompted the buying interest in textile stocks today," said Prerna Jhunjhunwala, VP, equity research - textile and retail, Elara Capital.

Jhunjhunwala said valuations are factoring in structural opportunities from the US Free Trade Agreement, the India-US trade deal, and a potential deal between the EU and India, but near-term uncertainty is expected to persist.

"With Bangladesh's key exports - woven apparel ($4.78B) and knitwear ($2.63B) - now costlier, India's own exports in knit & woven garments ($2.55B each) and home textiles ($2.21B) are set to gain share," said Dharan Shah, Founder, Tradonomy.AI - an investment platform. "Gokaldas Exports, Vardhman Textiles, and KPR Mills are best positioned to benefit from this sourcing shift, especially in high-demand US apparel segments," he said.