Easing China Curbs: Impact on Indian Stocks and Sectors

The Ministry of Finance is considering plans to do away with five-year old restrictions on Chinese firms bidding for government contracts, reported news agency Reuters. This development may have a significant impact on the Indian stock market, especially for the infra sector and companies like L&T.

Impact on Dalal Street

Priyankar Biswas, Industrials and Logistics, Research Analyst at JM Financials Institutional Securities, believes that the development could be a ‘negative’ for transformers. According to Biswas, while the development could be ‘negative’ for the transformers space, the impact is ‘minimal’ for blue-chips like Larsen & Toubro and KEC International Ltd.

”I expect minimal impact on companies like L&T. But, there is a supply chain shortage resulting from transformer space. India has lack of availability of transformers and prices are high.” Biswas explained that this is an attempt to bring pricing discipline in the transformer space.

Transformer Space: A Negative Impact

According to Biswas, the impact on large-space infra firms will be minimal. However, companies with transformer-based exposure, such as CG Power and Industrials Ltd, may be affected negatively.

”Pre-Galwan standoff as well, the amount of orders that China used to win was never to the tune of more than $2 billion. We don’t expect an L&T to get hurt. In fact, if the supply check bottlenecks along the way are sorted out then these companies will be opportunities,” said Biswas.

Companies with Transformer-Motor Exposure

Companies with transformer-motor exposure, such as CG Power and Industrials Ltd, may be affected negatively. However, companies like Siemens will see a limited impact because most of its orders are driven by smart infra space, which is a free pricing space.

The plan is in the offing and the discussions come amid India’s efforts towards reviving commercial relations with Beijing after border and diplomatic tensions have eased recently. Restrictions on China had been in place since 2020 following the deadly border clash between the nations’ troops.

Restrictions on Chinese Firms

Chinese firms were barred from competing for Indian contracts with an estimated value range of $700 billion-$750 billion over the curbs, until they registered with a government committee and obtained political, security clearances.

These measures had weighed on government departments and ministries and delayed development of projects, specifically in the power sector. Curbs imposed on Chinese imports for the power sector have disrupted the government’s plans to expand its thermal power capacity to about 307 GW over the next decade.

For more information on the Indian stock market and its trends, visit our website. We provide stock market news and updates to help you make informed investment decisions.

Conclusion

In conclusion, the easing of China curbs may have a significant impact on the Indian stock market, particularly for the infra sector and companies like L&T. However, the impact on large-space infra firms will be minimal, and companies with transformer-based exposure may be affected negatively.