The textile stocks witnessed huge sell-offs in today’s session on account of negative cues across the global markets. Today, the Indian markets opened up with a huge gap down of more than 3%. The negative cues are on account of rising inflation levels and anticipation of interest rate hike by the Federal Reserve.The margins of textile companies are already under pressure on account of rising key material cost i.e. cotton. The management of the Indian textile companies expects that the cotton prices would normalise over next two quarters from current levels. However, we expect cotton prices to go up slightly, given lower domestic production following bollworm infestation. The Union Budget has also announced to increase MSP prices of Kharif crops to 1.5x of cost of production. This would increase cotton MSP by ~22% to ~Rs5, 250.
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