Textile Stocks Extend Losses Amid US-Bangladesh Trade Deal Fears
Indian textile stocks continued their downward trajectory on Wednesday, February 11, marking a second consecutive day of significant declines. The sector witnessed drops of up to 5%, following an even steeper 11% fall in the previous trading session. This fresh wave of selling pressure was directly triggered by the finalization of a new trade agreement between the United States and Bangladesh on February 10, which has sparked concerns over heightened competition for Indian exporters.
Major Losers and Market Performance
Pearl Global emerged as the worst performer within the textile segment, with its share price tumbling more than 5.22% during the session. This decline came on the heels of a 10% drop just a day earlier. Kitex Garments followed closely as the second-biggest laggard, sliding over 4% after having shed 7% in the prior session.
Other prominent textile companies also felt the heat. Shares of Arvind, Go Fashion, and Raymond slipped around 3% on February 11. Additionally, other key players in the industry, including Alok Industries, Grasim, Bombay Dyeing, and Redtape, declined by up to 2% during the day's trading.
Select Counters Defy the Downtrend
Despite the broad-based selloff, a few textile stocks managed to buck the negative trend. Kewal Kiran Clothing, Jindal Polyfilms, and TCNS Clothing rallied as much as 7%, showcasing notable resilience even as the majority of their peers traded firmly in the red.
Impact of the US-Bangladesh Trade Agreement
The recent downturn represents a sharp reversal for Indian textile stocks, which had witnessed strong gains just last week. Those gains were fueled by the financialization of the India-US trade deal, which involves lowering tariffs on Indian textile exports to the US from 25% to 18%. Given that the United States remains India's top export destination for textiles, this development was initially viewed as highly positive for the sector.
However, sentiment soured rapidly following the announcement of the US-Bangladesh pact. The White House confirmed on Monday that the United States has lowered its reciprocal tariff on imports from Bangladesh to 19% under the newly-concluded agreement. Furthermore, the two nations agreed to address non-tariff barriers, and the US will grant tariff exemptions for select textile and apparel products originating from Bangladesh.
This has raised significant concerns that reduced tariffs for Bangladesh, coupled with specific tariff exemptions, could erode the competitive advantage of Indian exporters, leading to potential revenue visibility issues and pricing pressure within the sector.
Expert Analysis on Sectoral Inflexion Point
Jashan Arora, Director at Master Trust Group, provided critical insight into the market's reaction. He stated that the US-Bangladesh trade agreement, which grants zero-tariff access on certain textile categories, is poised to benefit Bangladesh substantially and is likely to alter the competitive dynamics of the global textile industry.
"The market’s sharp reaction in textile stocks reflects concern around near-term revenue visibility and pricing pressure in the sector," Arora explained. He characterized the development as a "sectoral inflexion point, not an apocalypse," predicting it will accelerate the divide between low-cost, commoditized exporters and more agile, value-added, and diversified textile players.
Focus on Companies with Niche Product Positioning
Arora further advised investors to carefully reassess their portfolio exposure within the textile sector. He recommended identifying companies with structural strengths, such as niche product positioning or superior cost efficiencies, rather than making sudden, reactionary exits.
"The investor's task is to identify which side of this divide their holdings—or potential investments—stand on. For the strong, this correction is an opportunity. For the weak, not so much. Discernment, not reaction, will be the key to navigating this spin cycle," Arora added, emphasizing a strategic, long-term approach.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies. Investors are advised to consult with certified experts before making any investment decisions.
