Best Textile Stocks to Buy in 2023
The Indian textile industry has a rich history that dates back to ancient times. Traders worldwide highly sought the high-quality cotton and silk fabrics that India produced. India’s textile and apparel industry is the largest source of foreign exchange earnings and one of the leading textile stock segments.
As per reports,
The industry contributes 4% to the country’s gross domestic product (GDP), 20% to its industrial output, and almost 30% to exports. About 38 million people are employed in the Indian industry, making it the single largest source of industrial jobs and the second-largest overall (after agriculture).
Textile stocks can offer investors a unique opportunity to gain exposure to a diverse and dynamic sector with the potential for high growth and resilience to economic cycles. Therefore, in this blog, we will explore the various aspects of the Indian textile sector, focusing on textile shares and textile industry companies. Additionally, we will also understand why business leaders and investors are keen to invest in textile stocks.
Textile Industry: Synopsis
The Indian textile industry, during the British colonial period, exported textiles to many countries and was one of the largest in the world. However, after independence, the industry faced several challenges, including a need for modernization and competition from synthetic fabrics.
Currently, the textile industry contributes about 14% to the country’s industrial output and about 17% to export earnings. The Indian textile industry is diverse, with various segments such as cotton, silk, jute, wool, and synthetic fibres. The cotton textile industry dominates the sector, which accounts for around 70% of the total textile production. Other significant segments include the synthetic and silk textile industries.
Therefore, the Indian government has launched several schemes to support the growth of the textile industry. One such scheme is the Amended Technology Upgradation Fund Scheme (ATUFS), which financially supports textile companies in modernising their machinery and equipment. Another scheme is the Integrated Textile Park (ITP) scheme, which aims to develop textile parks that provide infrastructure and support services to textile industry companies.
Thus, investing in the textile industry shares may offer potential opportunities for growth and profitability.
List of Popular Textile Shares in India
Let’s quickly look at the different textile industry shares that are reputable in the share market and have a proven track record for impressive returns. The textile stocks list is as follows:
| S.No. | Company Name | Market Cap (in Cr) |
|---|---|---|
| 1. | Vedant Fashions Ltd | ₹30,498 |
| 2. | KPR Mill Ltd | ₹20,768 |
| 3. | Trident Ltd | ₹15,649 |
| 4. | Vardhman Textiles Ltd | ₹9,041 |
| 5. | Jindal Worldwide Ltd | ₹7,178 |
Textile Manufacturing Companies- A Brief Overview
Let’s review the mentioned textile manufacturing companies and why they are considered the best textile stocks in India for some investors.
- Vedant Fashions Ltd: Mr Ratan Jindal founded Vedant Fashions Ltd, an Indian textile company, in 1971. The company operates in the manufacturing and exporting of textiles and garments segments.
- KPR Mill Ltd: Mr K.P Ramasamy founded KPR Mill Ltd, an Indian company, in 1984. The company operates in the manufacturing of yarn, knitted fabrics, and ready-made garments segments.
- Trident Ltd: Mr Rajinder Gupta founded Trident Ltd, an Indian company in 1990. The company operates in the home textiles, yarn, paper, and chemicals segments.
- Vardhman Textiles Ltd: Mr S.P. Oswal founded Vardhman Textiles Ltd, an Indian company in 1965. The company operates in the manufacturing and exporting of textiles and yarn segments.
- Jindal Worldwide Ltd: Mr Raj Kumar Jindal founded Jindal Worldwide Ltd, an Indian company in 1986. The company operates in the manufacturing and exporting of textiles, fabrics, and yarn segments.
Types of Textile Sector Stocks
Textile stocks refer to the stocks of companies involved in the textile industry. These stocks can be divided into categories based on the type of textile product the company produces. The categories of textile stock are listed below:
- Cotton-based textile stocks: These textile stocks are associated with companies that produce textiles made from cotton. Cotton is a major raw material used in the textile industry companies, and these stocks are influenced by factors such as the availability and price of cotton.
- Synthetic and blended textile stocks: Companies that produce textiles made from synthetic fibers or a blend of synthetic and natural fibres associate with these textile stocks. Factors such as the price of raw materials, technological advancements, and consumer demand influence these textile stocks.
- Garment stocks: These textile industry shares are associated with companies that produce finished garments, such as shirts, pants, and dresses. These textile shares are influenced by factors such as consumer demand, fashion trends, and production costs.
- Technical textile stocks: These stocks are associated with companies that produce textiles. Used in industrial applications, such as automotive textiles, geotextiles, and medical textiles. These textile stocks are influenced by factors such as technological advancements, government regulations, and global demand.
- Home textiles stocks: These shares are associated with textile manufacturing companies. These companies produce textiles used in home furnishings, such as bed linen, curtains, and towels. These textile stocks are influenced by factors such as consumer demand, fashion trends, and production costs.
Factors Affecting Textile Sector Stocks
With an overwhelming presence in the country’s economic life, portfolio investing in textile stocks can be an attractive option for many investors. Therefore, let’s review some of the factors before we begin further.
- Raw Material Prices: The price and availability of raw materials, such as cotton, silk, and synthetic fibres, can impact the profitability of textile manufacturing companies and, therefore, affect textile stocks and textile share prices.
- Foreign Exchange Rates: The value of the Indian rupee relative to other currencies can impact the cost of importing raw materials and the revenue earned from exporting finished products, affecting the profitability of textile companies and their share prices.
- Government Policies: Policies related to trade, taxation, and regulation can impact the company’s profitability and affect textile share prices. For example, changes in import/export policies can impact the availability and cost of raw materials, while changes in taxation policies can affect the cost of production and profitability.
- Export Market Conditions: The demand for textile products in international markets can impact the revenue textile manufacturing companies earn. As a result, the textile share prices also get affected.
Why Should You Invest in Textile Sector Stocks?
As the world’s largest textile industry, India has the most spindles installed as far as spinning yarn is concerned. Therefore, for investing in textile sector stocks in India, you must have a Demat account to witness great portfolio returns. Let’s learn how.
- Growth Potential: The textile industry companies have a high growth potential due to factors such as increasing population, rising disposable income, and changing consumer preferences. Investing in textile stocks can provide exposure to this growth potential.
- Export Potential: Indian textile companies have a significant presence in international markets and have the potential to expand further. Investing in textile stocks can provide exposure to this export potential.
- Diversification: Investing in textile sector stocks can diversify a portfolio, as the textile industry shares are not highly correlated with other sectors.
- Resilience to Economic Cycles: The textile industry companies are relatively resilient to economic cycles, as demand for textile products tends to remain stable even during economic downturns.
- Brand Recognition and Reputation: Many textile companies in India have established brands and a good reputation for quality products, which can provide a competitive advantage and drive stock price growth.
Are There Any Challenges?
Since every investment opportunity comes with a certain degree of risk, it becomes important to consider every aspect. Therefore, below we have listed some primary challenges and how you can mitigate them by investing in smallcase (smart investment portfolio platform).
- Fluctuating Demand: Fluctuations in demand can impact the revenue and profitability of textile companies, affecting textile share prices. Therefore, by investing in smallcase, you can mitigate the challenge. Thus, by accessing expert-curated investment themes and portfolios that focus on well-positioned companies to navigate market fluctuations.
- Competition from Other Countries: Several countries (China, Bangladesh, and Vietnam) offer similar products at lower prices than Indian textile companies. These countries can impact the export potential and profitability of Indian textile companies and textile share prices. Therefore, you can invest directly in companies with strong brand recognition, established customer bases, and unique product offerings to avoid foreign competition.
- Dependence on Government Policies: The textile industry is highly dependent on government policies related to trade, taxation, and regulation. Changes in textile share prices, production costs, raw materials availability, and export potential can affect a textile company’s profits. Hence, smallcase provides regular updates on policy changes and their possible impact on portfolio investment themes. This allows investors to make informed investment decisions.
Looking at the increased consumption and unique moat of textile manufacturing companies, the textile sector stocks offer an impressive opportunity to invest in the best textile stocks in India. Thus, investing in textile stocks can be a progressive and profitable strategy for you to diversify your portfolio and capitalise on India’s growing textile industry. However, it’s essential to conduct thorough research and consult with a financial advisor before making any decisions.
Happy Investing!
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