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Up trend forecast for Textile stocks |
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2004-7-15
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Arvind Mills closed at new 52-week high while textile stocks rallied, contrary to the feature ‘down under’ in recent times.
The stocks of spinning mills and synthetic garment manufacturers also finished higher with increase in volumes.
The budget seems to have created the desired effect in the form of reduction in excise duty on cotton yarn.
The excise duty component was reduced from 8 per cent to 4 per cent, while that on cotton fabrics and garments it was lowered from 10 per cent to 4 per cent for companies opting to stay within the Cenvat chain.
For those opting out of Cenvat chain like cotton yarn, fabrics and garment manufacturers have all been exempt from excise duty. Effectively speaking, duty has been abolished on the entire cotton textile chain.
This move will significantly improve the competitive position of cotton textile players vis-a-vis man-made and synthetic textile producers.
Analysts state that scrapping of excise on raw materials - fabrics – would help garment exporters to reduce prices by about to 3 to 4 percent leading to better volumes.
They can now better compete China on the global front.
Consumers too are in for some good news as prices of branded garments are likely to come down marginally as garment producers can buy primary raw material fabric at 3 to 4 percent lower than the existing prices. The budgetary measures will positively impact bottom lines of apparel companies, market analysts pointed out.
With the prospects of WTO regime on textile quotas coming to an end December 2004, the new should hold a bright future for the textile industry as a whole and textile stocks in particular. |
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