Gokaldas Exports, KPR Mill, other textile stocks drop up to 6%. What is triggering the fall?

Synopsis

Indian textile shares dropped significantly on Tuesday. This followed Bangladesh signing a trade deal with the U.S. The agreement grants Bangladesh reduced tariffs and exemptions on certain textile and garment exports. This development is expected to increase competition for Indian manufacturers. Several Indian textile companies saw their stock prices fall.

Shares of textile companies such as Gokaldas Exports, KPR Mill, Pearl Global and other textile stocks decline up to 6% on Tuesday after neighbouring Bangladesh signed a trade agreement with the U.S., securing a reduced 19% tariff and exemptions on select textiles and garments made using materials sourced from the country.

In the morning, Gokaldas Exports led the decline, tanking 6% to its day’s low of Rs 792 on the BSE. KPR Mill was down 4.5% to its day’s low of Rs 935 per share. Pearl Global shares declined 6% to Rs 1,692 per share. Indo Count declined 3%, while Raymond Lifestyle shares edged lower by 2% from the last close. Welspun Living plummeted 5% to Rs 137 per share.

Under the agreement, textiles manufactured in Bangladesh using US-produced cotton and man-made fibre will attract zero reciprocal tariffs in the U.S. market. The development is seen as a negative for Indian manufacturers as it could intensify competitive pressures.

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“The United States commits to establish a mechanism that will allow for certain textile and apparel goods from Bangladesh to receive a zero reciprocal tariff rate. This mechanism will provide that a to-be-specified volume of apparel and textile imports from Bangladesh can enter the United States at this reduced tariff rate, but this volume shall be determined in relation to the quantity of exports of textiles, for example U.S.-produced cotton and man-made fibre textile inputs, from the United States,” the statement read.

The White House said Bangladesh had agreed to provide significant preferential market access for U.S. industrial and agricultural goods, including chemicals, medical devices, machinery and motor vehicles and parts, soy products and dairy goods, beef, poultry, tree nuts and fruit.

Bangladesh will also ease non-tariff barriers by accepting U.S. vehicle safety and emissions standards, recognising U.S. Food and Drug Administration certifications and removing import restrictions on remanufactured goods, the White House added.

The overall U.S. tariff rate on Bangladeshi exports, meanwhile, has been reduced to 19%, slightly higher than India’s 18% rate.

“The agreement will provide U.S. and Bangladeshi exporters unprecedented access to each other’s respective markets. The agreement will build upon our longstanding economic relationship,” the two countries said in their joint statement.

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