Textile Stocks Rally on Budget 2026 and EU FTA News

Textile Sector Gains Momentum

Indian textile stocks experienced a significant surge, with some companies gaining up to 9% in intraday trading. This rally was driven by two major catalysts: pro-industry announcements in the Union Budget 2026-27 and the finalization of a long-awaited Free Trade Agreement (FTA) with the European Union. These developments have created a positive outlook for a sector that is a cornerstone of the Indian economy, contributing significantly to GDP, industrial output, and employment.

Union Budget 2026: A Comprehensive Boost

Finance Minister Nirmala Sitharaman's budget speech outlined a multi-faceted strategy to strengthen the textile industry. The proposals are designed to enhance competitiveness, modernize infrastructure, and improve the entire value chain from fiber to finished goods. The integrated program aims to position India as a global textile hub.

Key highlights from the budget include:

• Integrated Programme for the Textile Sector: A five-part package designed to modernize clusters, improve input availability, and upgrade skills across the industry.
• National Fibre Scheme: This initiative aims to achieve self-reliance in natural fibers like silk and jute, as well as man-made and new-age fibers, securing the raw material supply chain.
• Textile Expansion and Employment Scheme: The government will support technology and machinery upgrades in traditional textile clusters, including the establishment of common testing and certification facilities.
• National Handloom and Handicraft Programme: This program will strengthen the ecosystem for weavers and artisans through targeted support and integration of existing schemes.
• Tex-Eco and Samarth 2.0: These initiatives focus on promoting sustainable textile manufacturing and upgrading the skilling ecosystem through stronger industry-academia linkages.

The India-EU FTA: A Game-Changer for Exports

The finalization of the India-EU Free Trade Agreement is a landmark development for the textile sector. The agreement is set to eliminate the existing 10-12% import tariffs on Indian textiles and apparel entering the EU market. This move places Indian exporters on a level playing field with competitors from Bangladesh, Vietnam, and Pakistan, who have long enjoyed zero-tariff access.

The EU apparel market, valued at approximately $16 billion in 2024, represents a massive opportunity. Historically, Indian exporters have seen their market share erode due to this tariff disadvantage. With the FTA, India's textile exports to the EU are projected to grow substantially from the current $1.2 billion to a potential $10-40 billion over the next several years.

Market Reaction and Top Performers

The dual announcements triggered a strong positive reaction in the stock market. Investors responded enthusiastically to the improved growth prospects, leading to a broad-based rally across the sector. Companies with strong export operations and robust manufacturing capabilities were the primary beneficiaries.

Note: Gains are based on intraday trading figures reported after the budget announcement.

Analyst Outlook and Key Beneficiaries

Market analysts view the combination of domestic policy support and enhanced international market access as a powerful catalyst for the sector. The removal of the EU tariff barrier is seen as a structural advantage that could significantly drive export volumes and improve profitability for Indian companies.

Analysts at Elara Capital and JM Financial have identified several companies that are well-positioned to capitalize on these opportunities. Key beneficiaries include export-oriented firms with established relationships in the EU market.

• Apparel: S.P. Apparels and KPR Mill, which derive 23-25% of their revenues from the EU, are considered clear winners.
• Home Textiles: Welspun Living and Indo Count are expected to leverage their existing partnerships to scale volumes rapidly.
• Integrated Players: Arvind Ltd., with its underutilized apparel capacity, is in a strong position to absorb new orders from the EU.
• Other Notables: Gokaldas Exports, Trident, and Vardhman Textiles are also expected to benefit from the favorable trade environment.

Long-Term Growth Prospects

The Indian textile industry is on a firm growth trajectory, with projections indicating the market could surpass $109 billion by 2029. The government's Production-Linked Incentive (PLI) scheme, combined with the latest budget initiatives, provides a strong foundation for domestic manufacturing.

The India-EU FTA complements these domestic efforts by unlocking a large, high-value export market. This synergy is expected to create a self-reinforcing cycle of investment, production, and exports. As companies begin to leverage these new opportunities, the sector is well-positioned to strengthen its global standing and deliver sustained long-term value to investors.