Pakistan flood, export demand to boost commodity value.
With the recession blues coming to an end, the textile industry as a whole is optimistic, and spinning sector in particular sees brighter days ahead.
The installed capacity of spindles in India makes for 24 per cent share of the global market.
India is one of the biggest exporters of yarns. With a highly sophisticated and well organised textile sector and favourable fiscal policies, the country accounts for about 25 per cent of the world trade in cotton yarns.
Besides, there are a large number of ancillary industries – machinery manufacturers, accessories, stores, ancillaries, dyes and chemicals – dependent on this sector.
The growth of Indian textile sector has been phenomenal during the last three-four years, propelled by the Technology Upgradation Fund.
Textile production (covering man-made fibre, filament yarn and spun yarn) showed a minor setback in 2008-09. However, the trend is set to reverse on a revival in demand and Government-supported initiatives such as setting up of integrated textile parks and allowing 100 per cent foreign direct investment in the textile sector through the automatic route.
The Technology Mission on Cotton has helped increase output with lower contamination levels and of better quality.
With a record crop projection at 325 lakh bales for the current cotton year and the ban on exports being lifted from October 1, cotton surely stands to gain.
Moreover, the recent developments in Pakistan could roll favourably for the Indian commodity trade and cotton in particular.
FC Stone Group, a global analyser of trends in cotton markets, states that demand for cotton from India, the world's second-largest producer and exporter, may climb after floods damaged crops in Pakistan.
Floods have destroyed 30 per cent of the crop in Pakistan, the fourth-largest producer.
Textile sources said the flooding in Pakistan and in China's cotton-producing regions has led to heavy inquiries from panic-stricken traders.
In light of the short supply in Pakistan and China, the demand outlook for Indian cotton has brightened and the trade is upbeat about export prospects.
Cotton has risen 27 per cent in the past year in New York and the commodity may trade around “the current historically high levels until at least the US harvest at the end of the year,” says a report from Olam International Ltd.
Cotton prices are likely to touch new highs on robust export demand though hopes of a bumper crop and Government's plans to cap exports may weigh on sentiment.
With all these bullish factors, spinning mills companies such as Vardhaman Textiles, Alok Industries, Amarjothi Spinning, Bannari Amman Spinning Mills Ltd, Nahar Spinning, Lakshmi Mills, Ambica Cotton, Rajasthan Spinning & Weaving Mills Ltd stand to benefit.