Capital Goods Stocks Plunge as India Considers Lifting China Contract Ban

INDUSTRIAL-GOODSSERVICES

Overview

India's Finance Ministry is reportedly planning to scrap a five-year ban on Chinese firms bidding for government contracts, a move that sent capital goods stocks sharply lower on Thursday. Shares of Bharat Heavy Electricals Ltd. (BHEL) tumbled up to 9%, while ABB India and Siemens India also registered significant drops, reflecting investor concerns over increased competition. The potential policy shift follows a recommendation to ease import restrictions that have impacted India's power sector expansion plans.

Capital Goods Stocks Tumble

Capital goods stocks took a sharp hit on Thursday as reports emerged that India's Finance Ministry is contemplating the removal of a five-year-old restriction barring Chinese companies from bidding on government contracts. Bharat Heavy Electricals Ltd. (BHEL) saw its shares plunge by as much as 9%, triggering a lower circuit, while Larsen & Toubro Ltd. (L&T), ABB India Ltd., and Siemens India Ltd. also registered significant declines.

BHEL's stock experienced its biggest single-day drop since June 4, 2024. L&T shares shed 3.2%, ABB India fell 4.2%, and Siemens India declined 3.4%. This market reaction signals investor apprehension regarding potential increased competition from Chinese firms.

Policy Shift Under Consideration

Citing sources, a Reuters report indicated that the Finance Ministry is looking to scrap the curbs first imposed in 2020 following the Galwan border clash. These restrictions mandated Chinese bidders to obtain specific government committee registration and security clearances.

Sectoral Impact and Rationale

The report suggested that these import curbs have hampered India's ambitious plans to nearly double its thermal power capacity to 307 GW over the next decade. A high-level committee, led by former cabinet secretary Rajiv Gauba, has reportedly recommended easing these trade restrictions. CNBC-TV18 has not independently verified the Reuters report.

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