Why Are Ace Investors Aggressively Buying Textile Stocks & Is There Scope For More Gains? Experts Explain

Ashish Kacholia appears to be obsessed with Welspun Syntex. I reported earlier on how he had stormed the counter on Thursday and Friday and bought a massive truckload of 910,993 shares worth a fortune of Rs. 11.14 crore.

I hinted that Ashish Kacholia has not had his fill and that he would be back for more.

I was right!

Ashish Kacholia was at it today again. He bought another lot of 289,007 shares of Welspun Syntex at Rs. 130.44 each, laying down another Rs. 3.76 crore.

Welspun Syntex will now probably be amongst the top five stocks in Ashish Kacholia’s portfolio. His aggressive buying has propelled Welspun Syntex to the top of the YOY gains chart.

YOY returns of textile stocks as of 03.08.2015

Now, in the wake of this aggressive buying by the ace investors, we have to seek professional advice on what is happening and what our stand should be.

Luckily, there are two leading experts available to guide us, one from the fundamental side and the other from the technical side.

Ravish Kumar is the founder of RSQ Capital. In his latest piece in IBN titled “Indian textile industry coming of age” he has explained why the textile industry has suddenly become so attractive. He points out that a multitude of factors have come into play simultaneously such as the fall in cotton prices, slowdown in China owing to currency and wage hike woes, the aversion amongst major brands to outsource to Bangladesh after the tragedy there, the proactive government policy supporting the textile industry etc.

At the end, Ravish Kumar emphasizes that though the Indian textile sector has grown by leaps and bounds, its share in the global market is still a measly 4% compared to China’s 35%. He says that there is still a lot of opportunity and drops the hint that the textile industry may achieve the same, if not better, degree of multi-year growth that the Information Technology and the Pharmaceuticals sector achieved earlier.

Nooresh Meerani is an expert on technical analysis. In his post titled “Textiles Sector Run up – What next – Is it a start or an End?” Nooresh Meerani states that “A lot of things are at the right place at the right time” and that the textile sector “could surprise over the next couple of years”. He adds that “Technically a sectoral trend starts with all stocks in the sector making all time highs/ multi year highs” and that the best case is to ride and stay on to it till it makes “Higher Tops and Higher Bottoms”. He emphasizes that the fundamental momentum will continue and that one should “continue to ride on or look for opportunities on dips”.

So, going by the consensus opinion of the two experts, we can safely say that there is no reason for us to get jittery about the steep surge in the textile stocks. Instead, we have to fasten our seat belts and enjoy the joy ride.

On the question as to what stocks to buy, my suggestion is that we stick to the straight and the narrow path by researching only the stocks backed by the stalwarts such as Nandan Denim, Ambika Cotton, RSWM, Welspun Syntex etc. There is no point in venturing into unknown stocks and getting our fingers singed!