India-US trade deal impact: Sona BLW, Gokaldas, Bharat Forge, SRF shares gain up to 20%; here's why

Shares of auto ancillaries, textiles, chemicals, pharmaceutical and information technology companies surged up to 20 per cent in Tuesday’s trade after India and the US announced a trade deal. The sectors are seen as key beneficiaries of the cut in US tariffs on Indian goods to 18 per cent from 25 per cent earlier, along with the removal of the additional 25 per cent levy linked to Russian crude oil imports.

Auto ancillary stock Sona BLW Precision Forgings Ltd (Sona Comstar) soared 9.12 per cent to Rs 544.95. Bharat Forge Ltd rallied 9.42 per cent to Rs 1,579.90. Suprajit Engineering advanced 6.76 per cent to Rs 473.10.  

Textile player Gokaldas Exports Ltd hit its 20 per cent upper circuit at Rs 696.10. K.P.R. Mill also hit its 20 per cent upper circuit at Rs 1,031.30. Welspun Living Ltd climbed 18.22 per cent to Rs 145.    

Chemical stock SRF advanced 5.93 per cent to Rs 2,968.60. Navin Fluorine International Ltd was up 8 per cent. Gujarat Fluorochemicals Ltd up was 7 per cent while Atul rose 5.36 per cent to Rs 6,282. 

Aarti Industries Ltd surged 11.87 per cent to Rs 417.45. Aurobindo Pharma Ltd gained 5.02 per cent to Rs 1,234.05. Dr Reddys Laboratories Ltd advanced 3.69 per cent to Rs 1,226.  IT players such as Infosys, Tata Consultancy Services and Wipro added up to 2 per cent.

"The US–India trade deal is particularly positive for export-oriented sectors with meaningful exposure to the US market. Sectors such as textiles, chemicals, pharmaceuticals, auto ancillaries, IT services and select industrials stand to benefit from improved market access, tariff rationalisation and greater supply-chain certainty. Over time, higher order inflows, better capacity utilisation and improved earnings visibility could support sustained growth and valuation re-rating for these sectors," Axis Securities said.

It sees the development positive for Dr Reddys Laboratories, Lupin, Aurobindo Pharma, Aarti Industries, Pitti Engineering, Kirloskar Brothers, Welspun Living, Sansera Engineering,  Steel Strip Wheels, Infosys, HCL Tech, LTI Mindtree, among others. 

The trade deal directly benefits a narrow part of the market, said Emkay Global. 

"It included i) Chemicals (SRF, Navin Fluorine, Gujarat Fluoro, Aarti, Atul); ii) Textiles (Gokaldas, Welspun Living); and iii) Auto Ancillaries (Suprajit, Bharat Forge, Sona Comstar). There could be a negative impact on OMCs and Reliance if India stops buying Russian crude," Emkay Global said. 

The bigger play is the broader market, it said.

"Our preferred themes are i) SMID banks plus NBFCs to play the acceleration in the easing cycle, ii) discretionary consumption through autos, and iii) new age/internet stocks – which is a structural India play for us. Our preferred picks are Tata Motors CV, IDFC First Bank, Shriram Finance, Shriram Pistons, Lenskart, and Eternal," it said.