With the Indian rupee depreciating almost 15% against the greenback in the last one month, the stocks of major textile firms are back in demand among investors on anticipation of an increase in exports. Major textile companies like Gokaldas Exports, Hanung Toys & Textiles, Bombay Rayon Fashions, SEL Manufacturing, House of Pearl Fashions, Koutons Retail India and Alok Industries, among others, have witnessed their stock prices rising in a range of 2% to 44% in the past two trading sessions.
Industry experts say that textile exporters are anticipating a healthy growth curve on the back of the falling rupee that will boost their export realisations.
“On the positive side, if the rupee devaluates further or remains stable at its current level, exports will be healthy compared to the last few months. Exporters will further benefit, if along with the currency devaluation, the global recession does not worsen,” said Amit Goyal, president, Confederation of Indian Apparel Exporters (CIAE), adding further that smaller markets like Spain and Denmark have placed huge orders with Indian players.
Last two years have been really worse for the domestic textile sector. If it was the appreciating rupee that resulted in the textile industry failing to meet its exports target of Rs 50,000 crore during the financial year 2007-08, the recession in major export destinations like the US and Europe further hit hard the Indian textile sector in the current financial year, especially post-September.
Indian players, especially from Tirupur in Tamil Nadu, who have been exporting their products to international brands like Espirit Nautica GAP had a huge dent in overseas revenues in FY 2008 due to the appreciation of the rupee, have now witnessed a surge in their export order during February and first week of March for the coming quarter.
“We procure orders from Europe and US every quarter of the year. Though there has been a dip of nearly 10% in bulk orders from the US and Europe post September 2008, we have started getting bulk orders from markets in the Middle East this February-March. The falling value of the rupee will help us with better revenues,” said an exporter from Tirupur. In fact, exporters from Tirupur had seen a dip of 10% at Rs 950 crore in their export target in the previous year.
Due to a slowdown in the US and Europe, the majority of textile stocks have been hammered badly in the domestic bourses till recently. Market experts say that the current rally is more to do with positive sentiments rather than on pure fundamentals reasons.
Girish Solanki, senior research analyst, Angel Stock Broking said, “Unless the situation in the US and Europe improve, there will not be any major fundamental changes for these companies. Most of these stocks having substantial amount of private equity investment have witnessed sharp correction in the last couple of months. So what we are witnessing now is a relief rally in line with the broader trend in the market”