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US merchandise import data capturing the coming holiday season sales needs to show an increase. As market disruption took its toll, India’s share in total home textile exports to the US fell by a percentage point in the first five months of this year, shows data compiled by JM Financial Institutional Securities Ltd. According to an analyst with a domestic broking firm, the market share losses began to subside with cotton sheets gaining a foothold from June. The volume recovery should also translate into earnings. Despite healthy volume growth, Indo Count Industries and Welspun India’s earnings remained weak as reduction in export incentives, high cotton costs and low realizations impacted performance. The depreciating rupee may provide some relief. But as an analyst with a domestic broking firm pointed out, obtaining quality cotton at benchmark rates can be a challenge given the pest attacks and reduced crop acreage. Improving US retail sales have raised the prospects of a recovery in performance of home textile exporters. However, clarity on the pace of recovery and earnings improvement is what will determine if investors in these companies also benefit.
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