Textile company shares were in focus on Monday as they soared as much as 19% on BSE in intraday trading amid heavy volumes on expectations of lower prices cotton due to collapsing demand and increased cotton plantings.
Vardhman Textiles (VTL) jumped 19% to Rs 318.05 on the BSE thanks to a more than 10-fold increase in trading volumes. A total of 4 million shares have changed hands over the counter at the time of writing, compared to an average of less than 40,000 shares traded over the past two weeks on the NSE and BSE .
Himatsingka Seide, meanwhile, climbed 11% to Rs 121.60, followed by Nitin Spinners (8% to Rs 215), Ambika Cotton Mills (8% to Rs 1,740), Welspun India (7% to Rs 75, 45), Gokaldas Exports (6% at Rs 341), Nahar Spinning Mills (5% at Rs 317.85) and Trident (5% at Rs 38). By comparison, the S&P BSE Sensex was up 1.2% at 54,361 points at 2:00 p.m.
Share prices of these companies were down as much as 50% from their respective 52-week highs, due to the rising cost of raw materials, mainly cotton. Inflation on the raw materials, energy and supply chain fronts negatively impacted the operating profitability of the textile sector in FY22.
High cotton prices have been the sore spot for Indian textile exporters. Although corporate management expects inflationary headwinds to continue in the near term, the outlook for the industry remains optimistic.
According to a India time report, after reaching the lifetime high of 110,000 rupees per candy (356 kg) in the past few months, the price of cotton is expected to fall to 60,000 rupees per candy by December 2022 due to the collapse of the demand and wait-and-see market strategy players.
Cotton prices have fallen to around Rs 80,000-Rs 85,000 and forward bookings for October-November are priced at Rs 66,000-68,000 per candy. The Spinners Association Gujarat (SAG) estimates that by December, cotton prices will drop below Rs 60,000, the newspaper reported.
The likelihood of increased cotton production (at least 10 percent more plantings) in the following year should further reduce cotton prices. We believe that lower cotton prices would benefit the entire textile value chain and should lead to better utilization and profitability for all players in cotton textile products, ICICI Securities said in a statement. note.