BHEL, ABB India Stocks Tumble on China Bid Concerns
Overview
Capital goods shares, including BHEL and ABB India, plummeted 3-6% Monday amid reports that Chinese firms might be allowed to bid on Indian government contracts starting FY2027. While no official notification exists, industry experts suggest TBEA's potential approval for high-voltage reactor bids could increase competition. Analysts anticipate valuation corrections, though immediate earnings impact is deemed limited due to capacity constraints.
Stocks Mentioned
Shares of major Indian capital goods manufacturers, including Bharat Heavy Electricals Ltd. (BHEL) and ABB India Ltd., experienced significant selling pressure Monday, dropping between 3% and 6%. The decline extends losses from the previous week, fueled by concerns over potential reports suggesting Chinese companies may be permitted to bid for government contracts in India.
Heightened Competition Fears
Reports circulating in the market indicate a potential shift in policy that could allow Chinese manufacturers to participate in future bids for power transmission and high-voltage reactor segments. Renu Baid Pugalia of IIFL highlighted industry indications that a Chinese manufacturer, TBEA, has reportedly been approved to bid for reactors from the financial year 2027. While official government notifications remain absent, the mere possibility has cast a shadow over domestic players.
Market Reaction and Valuation Adjustments
The news has already triggered a notable market reaction. BHEL shares traded 3.8% lower at ₹264, while ABB India saw an 1.8% dip to ₹5,000. Hitachi Energy India's stock fell 2.9% to ₹17,363, and CG Power's shares were down 1.3% at ₹587. IIFL's Pugalia suggested that valuations for these capital goods companies are likely to correct, factoring in increased competition. She noted that market prices were already poised for a correction, but the announcement of Chinese manufacturers potentially re-entering bids adds a significant sentiment overhang.
Capacity Constraints Limit Immediate Impact
Despite the sentiment pressure, analysts believe the immediate impact on earnings and market pricing might be limited. Pugalia pointed out that capacities within the sector remain constrained. This lack of readily available supply could buffer domestic players against a sudden crackdown on pricing, even with the prospect of new competition. The focus remains on how the government officially clarifies its stance and whether actual policy changes will materialize.
