Sensex gains 17% in 2010

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Rounding off 2010 with gains of 17% for the whole year, the BSE-Sensex was amongst the top gainers in Asia today. Buying interest in telecom, banking and auto stocks helped the indices stay firmly in the positive throughout today's session. The BSE Sensex closed the session higher by around 120 points (up 0.6%), whereas NSE-Nifty logged in gains in the region of 33 points (up 0.5%). The BSE Midcap and BSE Small cap indices also gained in excess of 1% today.

Majority of the Asian indices closed positive today whereas Europe is trading weak currently. The rupee was trading at Rs 44.7 to the dollar at the time of writing.

As per a business daily, capital goods major BHEL has approached the government for remedial action to counter the threat posed by Chinese power equipment suppliers. The company has urged the government to impose duties on Chinese imports which are cheaper and cannibalizing the share of Indian players. According to BHEL, Chinese equipment supplies are 20% cheaper than the domestic supplies.

The government has already clamped down on the supply of power generation equipment from China. Earlier this year, it had tightened visa regulations in a move that forced at least 3,000 Chinese workers on power projects to leave the country. Subsequently, it put in place strict new limits so that no more than 1% of a project's work force can be foreign nationals. More recently, the CEA (Central Electricity Authority) asked government controlled power generation companies to use only Indian equipment on all upcoming projects. However, it seems that in the absence of import duties on Chinese power equipment supplies, they will continue to pile on Indian shores.

Led by spike in food and oil prices, India's annual inflation target is unlikely to be met in FY11. India's annual wholesale price index (WPI) inflation for November stood at 7.5%. The food price index rose 14.4% while the fuel price index climbed 11.6% in the year to December 18, 2010. The RBI has set a target of 5.5% headline inflation by the end of the fiscal, although the upside risks to the number are high.

The likelihood has also been growing for another interest rate hike by the RBI in January 2011 after it left rates unchanged in December, following six increases since March 2010.

In another development relating to broader economic data, India's fiscal deficit for the first 8 months of FY11 came in at 48.9% of the full-year target. Proceeds from the government's disinvestment plans and telecom auctions seem to have helped keep the deficit number within the estimated levels. It may be noted that in February 2010, the government had forecast a fiscal deficit of 5.5% of GDP for FY11. Having said that, going forward the rise in crude oil prices are expected to increase the subsidy burden of diesel and widen the fiscal deficit.