Textile stocks crash over 9% after Trump’s tariff tantrum; should investors buy the dip or wait it out?

Textile and apparel stocks took a heavy beating on Thursday as markets reacted sharply to former US President Donald Trump’s fresh move to slap a 25% tariff on Indian exports, effective August 1. The move triggered a sector-wide sell-off, with key export-linked textile counters falling as much as 9 per cent in intraday trade.

At the opening bell, the BSE Sensex crashed nearly 800 points, while the Nifty 50 dropped over 200 points, before recovering into the green by afternoon. However, the textile sector remained deep in the red, underscoring investor concerns over its high dependence on the US market.

Why are textile stocks falling?

The US is India’s largest destination for textile and apparel exports, accounting for nearly 42 per cent of the country’s total outbound textile trade. According to the Commerce Ministry, India exported $34.4 billion worth of textiles in FY24, making it a key pillar of India’s manufacturing and export economy.

Trump’s tariff announcement is seen as a direct blow to competitiveness. “The 25 per cent tariff significantly raises the landed cost of Indian textiles in the US market. For MSME exporters, this is a major setback. Export margins could vanish overnight,” said Sanjay Tripathy, CEO, BRISKPE.

Textile stocks performance

Stock

Price Movement (Intraday)

Mid-cap names like Indo Count and Vardhman saw sharp declines, while export-focused stocks like Pearl Global and Welspun Living bore the brunt.

What should investors do now?

Markets will react negatively to the imposition of tariff on India. Despite the unpredictable policymaking of the US, markets were expecting a tariff deal to work out as longer-term US-India strategic interests are aligned,” said Nilesh Shah, MD Kotak Mahindra AMC.

However, not all is lost. Investors with a long-term horizon may view this correction as a buying opportunity in top-quality names. Stocks with strong balance sheets, robust US exposure, and ability to diversify product mix (e.g. into technical textiles) could emerge stronger.

Watch out for

• Watch Q2 earnings for guidance on order books and margin impact.

• Investora may focus on top textile stocks like Page Industries or Arvind for stability.

• Tariff-related pain may persist short term, but long-term tailwinds like PLI schemes, China-plus-one, and monsoon-driven rural demand remain intact.