Major Indian engineering and capital goods companies witnessed sharp stock declines on Thursday following reports that India's Finance Ministry is considering removing five-year-old restrictions on Chinese firms bidding for government contracts. According to Reuters, citing two sources, the move may come as the government seeks to revive commercial ties with China amid eased diplomatic and border tensions.

Stock Market Performance

Bharat Heavy Electricals led the decline among engineering stocks, with shares plunging up to 14% during intraday trading before recovering slightly. The stock finally closed at ₹276.90, up from the day's low of ₹261.50, though still ending nearly 9.00% lower on the NSE.

This marked BHEL's biggest single-day drop since June 4, 2024, when the stock had declined 21% following the Lok Sabha election results announcement. Despite Thursday's fall, BHEL shares have outperformed benchmarks with 20.00% returns over the past year, compared to Nifty's 9.00% and Sensex's 8.00% returns.

Broader Market Impact

The overall market sentiment remained negative, with benchmark indices witnessing significant declines. The Nifty ended with cuts of 1.00% at 25,876.85, falling by 263.90 points, while Sensex dropped 780 points to settle at 84,180.96.

The selling pressure was witnessed across sectors, with particular weakness in IT, metals, pharma, and PSU banking stocks.

Policy Background and Implications

The restrictions under consideration for removal were implemented in 2020 following deadly border clashes between Indian and Chinese troops at Galwan. Under the current framework, Chinese companies must register with a government committee and obtain political and security clearances before participating in government contract bidding processes.

Several government ministries have reportedly requested exemptions from the current restrictions, citing project delays particularly in the power sector. The curbs have specifically affected India's plans to expand thermal power capacity to nearly 307 GW over the next decade.

Competitive Concerns

The potential policy change could significantly impact Indian engineering companies whose revenue and order books heavily depend on large government contracts. These firms have enjoyed a competitive advantage over the past five years, as they could bid for government projects without facing competition from Chinese companies known for aggressive pricing strategies. The proposed removal of restrictions represents a significant shift in India's procurement policy and could reshape competitive dynamics across multiple sectors including power generation, infrastructure development, and technology projects.

The finance ministry is set to convene a second round of discussions with insurers and hospital groups around mid-January to address the pressing issues of rising medical inflation and steadily increasing health insurance premiums. This initiative represents the government's continued effort to make healthcare more affordable and accessible for policyholders across the country.

Meeting Structure and Participants

The upcoming meeting will be chaired by financial services secretary M Nagaraju and will bring together key stakeholders from the healthcare and insurance sectors. The discussions will include representatives from multiple organizations working to address systemic challenges in health insurance.

Key Discussion Areas

According to a government official, the meeting aims to take stock of proposed industry measures designed to bring down health insurance premiums and ensure greater transparency in claim settlement processes. The discussions will also explore the role of the Policyholders' Education and Protection Fund, which has been established through the Insurance Amendment Act, 2025.

The talks build upon an initial meeting held in November, where the ministry raised concerns about affordability and requested that insurers and hospitals collaborate on several critical areas:

• Standardized treatment protocols
• Uniform hospital empanelment norms
• Faster and more seamless cashless claim processing

Regulatory Measures Under Consideration

The ministry has been examining various regulatory options to control sharp premium increases that have been affecting policyholders. One significant proposal under discussion involves mandating prior approval from the Insurance Regulatory and Development Authority of India when insurers seek to raise premiums by more than 10% annually for policyholders.

This approach mirrors the regulator's directive for senior citizens implemented in January 2025, which bars insurers from increasing premiums by more than 10% annually without regulatory consultation for customers aged over 60.

Market Context and Industry Significance

Health insurance continues to dominate the non-life insurance sector, representing the largest segment within this category. The sector's growth trajectory demonstrates its increasing importance in the Indian insurance landscape.

Government's Strategic Approach

The finance ministry has emphasized that hospitals and insurance companies must work together to ensure transparency and efficiency while making healthcare affordable and accessible for policyholders. Officials believe that the proposed measures are critical to controlling costs and improving the overall policyholder experience amid increasing claims.

The government's approach focuses on creating a collaborative framework where all stakeholders contribute to solutions that benefit policyholders while maintaining the sustainability of the health insurance ecosystem. The upcoming January discussions will provide a platform for evaluating the progress made since the November meeting and identifying additional measures needed to address ongoing challenges in the sector.