Bharat Heavy Electricals (BHEL) shares remained in focus as brokerages assess the potential implications of relaxed restrictions on Chinese companies bidding for Indian government contracts, while fresh order wins provide fundamental support to the stock.

Market Performance and Sector Impact

BHEL shares surged nearly 5% to ₹284.10 on the NSE at 10:24 am on Friday, recovering from the lower circuit of ₹261.50 hit on January 8, 2026. The broader industrial sector showed mixed performance, with L&T rising 1% to ₹4,081.80, while Afcons Infrastructure and Siemens Energy India declined 2% to ₹368.35 and ₹2,477.40 respectively.

Brokerage Views on Policy Changes

Jefferies highlighted differentiated impact across companies from potential policy relaxation. The brokerage expects defence sector to see minimal impact, while companies like L&T, Afcons and BHEL could face relatively higher competitive intensity. ABB and CG Power may also experience some impact, though transmission and distribution players like Siemens Energy and Hitachi Energy could remain largely insulated due to national security priorities.

Bernstein adopted a cautious stance, expressing surprise if the government completely removes existing frameworks without constraints. The brokerage anticipates segment-specific relaxation or additional compliance requirements for Chinese firms, noting that multinational equipment suppliers would face greater impact than construction-heavy companies.

UBS Maintains Positive Outlook

Despite policy uncertainty, UBS reiterated its 'buy' rating on BHEL with a target price of ₹375. The brokerage emphasized BHEL's recent ₹54 billion coal gasification and raw syngas cleaning plant order win, bringing the company to approximately 60% of its targeted FY26 order inflows.

Technology Advancement and Strategic Projects

UBS highlighted an order awarded by BCGCL, the joint venture between Coal India and BHEL, for a coal-to-ammonium nitrate project. This project represents the first commercial deployment of BHEL's proprietary pressurised fluidised bed gasification technology, marking a significant transition from research and development to execution phase.

Market Outlook

According to PL Capital, while BHEL and L&T could face incremental competitive pressure in the BTG segment if Chinese players gain bidding access, Chinese participation will likely remain limited due to strategic sensitivity and control risks in critical infrastructure projects. The company's improving order inflows, technology differentiation and execution pipeline are viewed as key factors that could offset broader sectoral concerns.

Bharat Heavy Electricals shares staged a sharp recovery on Friday, rising as much as 4.8% to ₹285.50 on the BSE after hitting the lower circuit with a 10% decline the previous day. The rebound came as investors reassessed reports suggesting India may ease restrictions on Chinese firms bidding for government contracts, which had initially sparked concerns about intensified competition for state-run power equipment manufacturers.

Market Performance and Recent Trends

Despite Friday's recovery, BHEL shares remain under pressure from recent volatility. The stock performance over different timeframes shows mixed signals:

Policy Background and Market Concerns

The initial selloff was triggered by media reports indicating India's plans to potentially scrap curbs on Chinese firms participating in government contract bidding. These restrictions were originally introduced in 2020 as part of the Atmanirbhar Bharat package and subsequent amendments to the General Financial Rules, implemented following India-China border tensions.

Under the existing framework, bidders from countries sharing land borders with India must obtain mandatory political and security clearances, effectively restricting imports from China across sensitive sectors including power and energy. The potential policy change raised investor concerns about increased competition and pressure on pricing and margins for domestic manufacturers.

JM Financial: Optimistic Outlook on Policy Changes

JM Financial presented a contrarian view, suggesting that removing restrictions could actually benefit public sector undertakings like BHEL rather than harm them. The brokerage highlighted that component-level restriction removal, particularly for items like CRGO steel, would provide operational advantages.

Before the 2020 restrictions, Indian heavy electrical equipment manufacturers imported substantial quantities of castings, forgings, and pipes from China. Post-curbs, companies were forced to source from Europe, resulting in higher costs and execution delays due to limited global supplier availability.

The brokerage noted that existing requests for proposals covering approximately 97 GW of new thermal power projects mandate domestically manufactured equipment, providing protection against potential Chinese competition.

Jefferies Expresses Caution

Jefferies adopted a more cautious stance, characterizing the possible restriction easing as a "potential negative development" for industrial players. The brokerage identified BHEL, along with L&T and Afcons, as companies likely to experience the highest impact from such policy changes.

Jefferies emphasized that transmission equipment could remain relatively protected due to national security considerations, while noting that thermal power equipment and railways were specifically mentioned in media reports about potential policy changes.

Technical Analysis Overview

BHEL's technical indicators present mixed signals reflecting the recent volatility. The stock currently trades below short-term moving averages while maintaining positions above longer-term trend indicators:

The Relative Strength Index at 41.90 indicates the stock is neither overbought nor oversold, while the MACD remains above its center line but below the signal line, suggesting mixed momentum signals.