China+1 narrative stocks off day's high as US-China ink trade pact; Dixon Tech, SRF, Welspun in focus

Dixon Technologies, Welspun Living, and SRF were off the day's high after the trade pact between US and China was inked.

Shares of domestically listed companies that benefitted from the 'China + 1' narrative were sharply off their highs after U.S. and China agreed lower their respective tariff rates for a 90-day period.

The United States will reduce tariffs on Chinese goods from 145 percent to 30 percent for a 90-day period, while China will retain an additional ad valorem duty rate of 10 percent on U.S. goods, down from 125 percent. Both countries have agreed to remove certain tariffs imposed on goods effective April 8 and 9, and will establish a mechanism to continue discussions on economic and trade relations.

This led to shares of Dixon Technologies, Welspun Living, and SRF giving up a large portion of their intraday gains, falling between 2-4 percent from the intraday high, with KPR Mills trading in the deep red.

As countries moved their production and manufacturing away from China, India was seen as one of the most promising beneficiaries within Asia from the realignment of global supply chains.

Ahead of the announcement, India was undergoing a mix of both trade diversion and supply chain shifts, from US-based companies with operations in China, as well as non-US companies looking to
hedge against Trump tariff uncertainty, noted Nomura Holdings.

However, following the trade deal and reduction in tariffs, U.S. and China will retain their bilateral trade relationship, leading to firms who were planning to diversify away from China to remain in the nation.

"[When] a deal materializes between U.S. and China, it would be good for the global economy. But from an Indian perspective, that would be slightly disappointing, since we were expecting a trade deal with the U.S. ahead of many nations including China," noted VK Vijayakumar, Chief Investment Strategist, Geojit Investments.

In a conversation with Moneycontrol, Samir Arora, founder of Helios Capital said, "Reduction in U.S. tariff on China good for the world, okay for India. Going forward, global investors would continue to want to diversify outside U.S. which should keep foreign flows strong. Trade set up was very favourable with foreign investors coming back in a big way and domestic flows continuing to be strong."

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