Textile stocks stage a rally, up on strong FY06 results

Good FY06 results, institutional buying interest and a stable outlook on cotton prices are spinning the growth story of textile stocks.

The sector, which has been largely stagnant in the face of the booming market, has been catching up, even as the bulls are taking a breather in the engineering, construction and real estate counters.

Major textile gainers over the past week have been Banswara Syntex (up 42.78 per cent), Sarla Polyester (up 16.08 per cent), Ambika Cotton (up 15.9 per cent), Shri Lakshmi Cotsyn (up 12.15 per cent), Alok Industries (up 11.71 per cent), Abhishek Industries (up 9.31 per cent), Nahar Spinning (up 9.1 per cent), Arvind Mills (up 7.67 per cent) and S Kumars Nationwide (up 4.03 per cent).

Mukesh Agarwal of ILFS Investsmart said, "The upswing in textile stocks is partly on the back of institutional buying interest from the recently launched mutual fund schemes like Fidelity Special Situations Fund and Franklin India Equity Income Fund. Moreover, the FY06 results declared by some textile majors were good."

For instance, Raymonds posted 15.8 per cent growth in net sales to over Rs 1,300 crore. They have targeted a group turnover of about Rs 4500 crore by FY09. Alok Industries posted 15.9 per cent growth in net sales to Rs 1419 crore for FY06.

Agarwal added that last year cotton prices had fallen by about 17 per cent, but this year they were expected to remain stable.

Dealers also share the positive outlook on textile stocks. The valuations of textile stocks are also considered comfortable.