Textile stocks, including Gokaldas Exports and KPR Mill, are experiencing a surge following the interim India-US trade agreement, which confirms a reduced 18% tariff on textile exports. This agreement is poised to alleviate pressure on the sector, which has been heavily reliant on the US market.

Details of the Trade Agreement

The White House, in a joint statement with India, announced that the United States will apply a reciprocal tariff rate of 18% on originating goods from India, encompassing textiles and apparel. This measure falls under Executive Order 14257, originally issued on April 2, 2025, and subsequently amended, which aims to rectify trade practices contributing to the persistent trade deficit between the United States and other nations.

Impact on Textile Companies

The announcement has had an immediate impact, with shares of export-heavy textile companies like Gokaldas Exports, KPR Mill, Welspun Living, and Indo Count in focus. These companies have a significant portion of their revenue coming from the US market. Gokaldas Exports, Welspun Living, and Indo Count generate approximately 70% of their revenue from the US, while Pearl Global and KPR Mills derive around 50%.

Previously, Indian exporters faced tariffs as high as 50%, forcing them to absorb significant costs through discounts. The new framework is expected to restore pricing power and improve profit margins, making Indian goods more attractive to U.S. buyers seeking to diversify supply chains away from nations perceived as higher risk or cost. The Tiruppur Exporters' Association anticipates this will help reclaim export orders previously directed towards countries like Bangladesh.

Broader Market Implications

The India-US trade deal is expected to attract foreign investors and potentially trigger a market turnaround. Indian markets struggled in January, with the Nifty index declining and foreign portfolio investors selling billions of dollars worth of equities. Trade uncertainties, a weakening rupee, and global risk-off sentiment contributed to the underperformance of Indian equities. Analysts believe that this trade breakthrough could act as a catalyst for market recovery.

The Ministry of Textiles has welcomed the agreement, stating that it will strengthen textile trade relations between the two countries and boost textile exports. The US is India's largest export destination, with exports worth approximately $10.5 billion, consisting of around 70% apparel and 15% made-ups. The Ministry anticipates that the 18% reciprocal tariffs will make India more competitive and facilitate the manufacturing of value-added textiles. The deal is expected to contribute to the nation's goal of achieving $100 billion in exports by 2030.

Expert Opinions and Cautions

While the agreement is largely viewed positively, some analysts caution against expecting an immediate turnaround, as growth will depend on the behavior of the US consumer. Sunny Agrawal of SBI Securities noted that the underlying businesses of textile companies remain well-established and that the improved competitive landscape will allow companies to redraw supply plans.

Items Included in the Tariff Reduction

The United States will apply the 18% reciprocal tariff rate on various goods originating from India, including textile and apparel, leather and footwear, plastic and rubber, organic chemicals, home decor, artisanal products, and certain machinery.