Textile Stocks In 2026 Trade Deals And China Sourcing Shift Revive The Sector Is It A Good Time To Buy

The global textiles and apparel industry faced a difficult period between 2021 and 2025, hit by weak discretion ary spending, volatile raw material prices, supply chain disrup tions, high freight costs, and sluggish demand in key export markets. The environment is now improving, with early signs of demand recovery, inventory normalisation, and stabilising consumption trends.In India, strong domestic demand helped the sector weather this challenging period better than many of its global peers. Exports are expected to play a bigger role in driving growth. According to a June 2026 Press Information Bureau release, India’s textile and apparel market grew to $190 billion in 2025-26, and is projected to reach $350 billion by 2030. Brokerage reports published by Motilal Oswal, Nuvama, 360 One Capital, and Elara Capital, over June and July, also reflect growing optimism about the sector.Several structural factors are sup porting the positive outlook. Analysts point to global supply chain realignment, a gradual shift in sourcing away from China, the benefits of free trade agreements (FTAs), government incentives, and the potential for operating leverage as demand improves.An analysis of 65 listed textile companies with a market capitalisation of over Rs 500 crore shows that the group has delivered an equal weighted aver age return of 21.5% so far in 2026, significantly ahead of the 6.5% gain recorded by the Nifty 500 Equal Weight Index. Among these companies, 39, or about 60%, outperformed the broader market benchmark. The analysis is based on closing prices as of 10 August 2026.Share of Indian textiles & apparel exports 2025-26Trade agreementsOne of the biggest opportunities for the sector lies in India’s expanding net work of trade agreements. The India United Kingdom (UK) Comprehensive Economic and Trade Agreement (CETA) is already in force, while negotiations for a trade pact with the European Union have been concluded. India has also signed a free trade agreement with New Zealand. These agreements are expected to improve market access for Indian exporters by reducing tariff barriers and making Indian products more competitive overseas. Better access to large global markets could help exporters diversify customers and gain market share.Supply chain edgeIndia is well placed to benefit from the diversification of global supply chains as buyers seek alternatives to China. It is the world’s second largest cotton producer, with an output of around 5 million metric tonnes in 2025-26, and has the second-largest spinning capacity globally, at roughly 43 million spindles, according to Motilal Oswal. Its integrated textile ecosystem also allows global brands to source cotton, yarn, fabric and fin ished garments within the country, reducing dependence on multiple suppliers. According to Nuvama, India may not be able to compete with Bangladesh on labour costs in garment manufacturing. However, its strength lies in offering an end-to-end cotton-to-garment value chain, supported by large compliant factories, a stable policy environment, com petitive power costs, and tariff parity.Analysts caution that rising input costs could put pressure on margins in the near term. However, they believe these challenges are temporary. Prerna Jhunjhunwala, Vice President at Elara Capital, says margin pressure from cost inflation is likely to be transitory. Over the longer term, she expects textile companies to increase their presence in value-added products and improve efficiencies in the man-made fibre (MMF) value chain, which should support both margins and return ratios.Analysts believe the industry’s next phase of growth will require moving beyond its traditional dependence on cotton. According to 360 One Capital, companies that focus on integrated manufacturing, scalable garment ing operations, productivity improvements, product innovation, and disciplined capital allocation are likely to be long-term winners.K. Srikumar, Senior Vice President and Co Group Head at the Investment Information and Credit Rating Agency (ICRA), believes technical textiles, MMF, and value-added apparel offer attractive prospects. These seg ments tend to be less cyclical, enjoy stronger margins, and are seeing increasing accept ance across markets. That said, investors should not ignore the risks. Changes in government policies, geopolitical tensions, tariff-related disruptions, and a slowdown in global demand remain key factors that could affect the sector’s growth trajectory. Even so, with exports poised to accelerate and multiple structural tailwinds in place, the outlook for India’s textile industry appears to be con siderably brighter than it has been in recent years. Here is how the three textile stocks with a significant number of buy ratings on Bloomberg are placed:KPR Mill*Reported 9.6% year-on-year revenue growth in the June 2026 quarter.*Textile segment performance remained subdued, but analysts expect recovery as demand improves.*Expansion in higher margin branded apparel is expected to support growth.*Strong garmenting capacity and the up coming Odisha facility position the compa ny to benefit from export-led opportunities.Welspun Living*Reported 24% y-o-y consolidated revenue growth in the June quarter.*Well placed to benefit from strong ties with major retailers in the United States (US) and easing tariff concerns.*Likely to gain from FTAs given its pres ence in the UK and European markets.*Rising contribution from branded prod ucts is likely to enhance revenue quality. Indo Count Industries*Reported 26% y-o-y revenue growth in the June quarter, driven by new busi nesses (utility bedding + USA brand busi ness), while core business remained flat.*Remains a key beneficiary of its leader ship position in bed linen exports to USA.*High manufacturing capacity allows volume growth without significant in cremental capex.*New categories, such as pillows, quilts and mattress pads, are scaling up.Stocks mentioned are not recommendations. Consult your financial adviser.