The Hindu Business Line : Textile stocks find buyers

Some of the sector counters, such as Alok Industries, Arvind Mills and Bombay Dyeing, which are on the stocks futures segments too, were among the prominent gainers.

On the other hand, counters outside the stocks futures basket, were either in the red or their gains were rather muted.

Grim Situation

According to brokers and dealers, largely short covering exercise and some select fund buying were behind Friday’s upward movement in the textiles stocks. According to industry insiders, situation remains grim for the textiles players as a whole and may turn grimmer if the rupee appreciates further against dollar.

While rupee has moved up by around 14 per cent in the past one year against dollar, it has gained about 5 per cent against the euro. The dollar zone accounts for 50 per cent of the textiles exports from the country and the euro zone represents 45 per cent.

Breathing space

“There is a limit to tightening of your belt. Expansion plans are currently on hold. Margin squeeze is so severe that a volume game through additional scale is beyond reach of the most,” Mr Rajendra Hinduja, Director of Gokaldas Exports, told Business Line.

Daunting risk perception is also restricting value addition plans. Cost reduction exercise has been stretched to the limit at the risk of closing shop or serious industrial unrest. “Only a dozen or so top exporters could extract three to five per cent price increase from their US buyers in the past one year.

Some of the exporters to the European markets managed to snatch some breathing space by shifting to euro-billing from dollar payment,” he added.

The industry is seeking more reliefs from the Government in the form of additional duty-drawbacks; extension of tax holiday for EoUs and excise as also customs duty cuts in man-made fibres. But the fiscal measures may not be adequate for the survival of many exporters, who are hit by low margins as a consequence of slowing consumption in the US and appreciation in the home currency.

The trade relations are also coming in the way of the domestic players staying in competition.

“While absence of bilateral agreements with the US and European Union creates access problem, imports from the least developed countries are queering the pitch,” said an industry analyst.

Majority of the textiles stock are ruling off their year-highs and have lost anything between 20 and 30 per cent in the past one month. Some of the listed players are, however, fetching better price than the others because of value additions and already achieved capacity expansion including overseas acquisitions.

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