BHEL shares rally 5% after hitting lower circuit on China concerns. Should you buy, sell or hold?
The recovery came as investors reassessed reports that India may ease restrictions on Chinese firms bidding for government contracts. The earlier news had sparked fears of intensifying competition and pressure on pricing and margins for state-run power equipment makers such as BHEL.
Despite Friday’s recovery, the stock remains under pressure. BHEL is down about 5% over the past week and has fallen 2.6% so far in 2026.
Why the China factor spooked the market
The selloff was triggered by media reports suggesting that India plans to scrap curbs on Chinese firms bidding for government contracts. These restrictions were introduced in 2020 under the Atmanirbhar Bharat package and subsequent amendments to the General Financial Rules, following India-China border tensions.
As part of those measures, bidders from countries sharing a land border with India were required to obtain mandatory political and security clearances, effectively restricting imports from China across sensitive sectors, including power and energy.
JM Financial: Relief, not risk, for PSUs
JM Financial said the removal of restrictions, especially at the component level, could actually benefit public sector undertakings such as BHEL rather than hurt them.
“Removal of restrictions at the components level (e.g., CRGO steel) will benefit PSUs like BHEL,” the brokerage said, adding that even a broader easing would have “little impact” given developers’ past experience with Chinese equipment and strong domestic demand within China itself.
JM Financial noted that before the restrictions, Indian heavy electrical equipment manufacturers imported large quantities of castings, forgings and pipes from China. After the curbs, they were forced to source from Europe, raising costs and delaying execution due to a limited global supplier base.
Under a scenario where restrictions are lifted only under Rule-144, JM Financial said BHEL would benefit through lower costs and faster project execution. Even in a less likely scenario of broader relaxation, the brokerage expects “negligible” impact on BHEL, given that existing requests for proposals for about 97 GW of new thermal power projects mandate domestically manufactured equipment.
“We remain optimistic about sustained thermal opportunities and BHEL’s performance (execution, margins),” JM Financial said, maintaining a ‘BUY’ rating with a target price of Rs 363. It expects EBITDA margin to expand from 4.4% in FY25 to at least 10.7% in FY28, with EPS rising from 1.5 to 12.1 over the same period.
Jefferies flags potential negative development, seeks clarity
Jefferies struck a more cautious tone, calling the possible easing of restrictions a “potential negative development” for some industrial players.
“L&T, Afcons and BHEL are likely to see the highest impact,” Jefferies said, adding that details were still awaited on whether the move would materialise and how it would be implemented. The brokerage said defence would see the least impact, while transmission equipment could be relatively insulated due to national security considerations.
Jefferies highlighted that thermal power equipment and railways were being mentioned in news reports, but said the nuances of any policy change would be key.
Technical picture for BHEL shares
From a technical standpoint, BHEL’s charts reflect mixed signals. The stock is trading below its 5-day, 10-day, 20-day and 30-day simple moving averages, indicating bearish undertones in the short term. However, it remains above its 50-day, 100-day, 150-day and 200-day SMAs, suggesting that longer-term trends remain supportive.
The Relative Strength Index stands at 41.9, indicating the stock is neither overbought nor oversold. The MACD is at 4 and remains above its centre line but below its signal line.
Also read | China factor explained: Jefferies and JM Financial analysts decode the upside and risks for BHEL shares after 10% crash
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
