Mumbai, Jun 20 : The BSE Sensex tanked 556 points before recovering a little to close at 4-month low of 17,507 today on reports that the government might impose capital gains tax on investments into India that are routed via Mauritius.
A large portion of foreign direct investment and stock market inflows are routed through Mauritius for tax benefits on account of a treaty between the two countries.
Weak markets globally and continuing FII outflows worsened the sentiment, pulling down to the 30-scrip Bombay Stock Exchange index, Sensex, to intra-day low of 17,314.38, a fall of over 556 points.
However, it recovered some ground after Finance Secretary Sunil Mitra said India “cannot impose (the tax) arbitrarily”.
Sensex finally ended the day at 17,506.63, a fall of 363.90 points or 2.04 per cent. In four straight sessions, it has tumbled 802.03 points or 4.38 per cent.
The NSE 50-issue Nifty also ended at 4-month low of 5,257.90, a drop of 108.50 points or 2.02 per cent.
Top heavyweight Reliance Industries Ltd (RIL) continued its downward spiral, falling 3.89 per cent to hit one year low of Rs 829, contributing majorly to the fall. It has fallen for the seventh straight session following CAG report that slammed the oil ministry and DGH for allegedly favouring the company.
Other blue chips like ITC, Infosys, TCS, Tata Motors, HDFC Bank, ONGC, L&T, HDFC and SBI also lost ground.
“News report of India and Mauritius revamping the Double Tax Avoidance Agreement Treaty resulted in panic selling in the market,” said Shanu Goel, Senior Research Analyst at Bonanza Portfolio.
She said that although the undercurrent has weakened considerably, after a huge fall in a single day a short term technical bounce back cannot be ruled out Analysts also said that heavy sell-off in GTL stock impacted the market sentiment strongly.
“Besides report of negotiations on a tax treaty with Mauritius, reports of sale of pledged share by FIIs in one of the telecom infrastructure stock. Moreover, global markets continued to be weak on concern of Greece debt crisis,” Motilal Oswal Securities Associate VP Parag Doctor said.
Globally, trends in Asian and European markets were weak on the European Union's decision to delay euro 12 billion aid to Greece until it passes austerity package at home, fanning fears of the country's sovereign debt default.
REL Com was the top loser from the Sensex pack with a fall of 7.89 per cent, followed by REL Infra (6.07 pc), Tata Motors (5.15 pc), TCS (3.69 pc), ONGC (3.39 pc), Cipla (3.33 pc), Sterlite Ind (3.23 pc), Jaipra Asso (3.13 pc), ITC, (2.76 pc), DLF (2.41 pc), NTPC (2.38 pc), Jindal Steel (2.15 pc), HDFC Bank (2.02 pc), Infosys Tech (2.01 pc), Tata Steel (1.94 pc), SBI (1.42 pc), HDFC (1.28 pc) and L&T (1.27 pc).
Among the BSE sectoral indices, Realty plunged 4.16 pc, Oil & Gas (3.42 pc), IT (2.50 pc), Auto (2.46 pc), Power (2.28 pc) and Metal (2.24 pc).
Second-line counters underperformed the Sensex and lost heavily on selling by retail investors. The Smallcap slumped by 3.26 per cent and the Midcap by 3.18 per cent. The market breadth at BSE was sharply negative as 2,286 counters closed with losses against only 554 that ended with gains. Total turnover was up at Rs 2,829.92 crore from Rs 2,691.58 crore previously.
RUPEE: The rupee today decline by 13 paise to close at a 3-week low of 44.99/45.00 against the US currency following weak equities amid good dollar demand from some banks and importers.
The BSE Sensex tanked 556 points before recovering a little to close at 4-month low of 17,507 on reports that the government might impose capital gains tax on investments into India that are routed via Mauritius, which kept the rupee under pressure.
A large portion of foreign direct investment and stock market inflows are routed through Mauritius for tax benefits on account of a treaty between the two countries. Foreign Institutional Investors (FIIs) pulled out USD 410.32 million in six sessions since June 10.
Good dollar demand from banks and importers, mainly oil refiners weighed heavy on the rupee, dealers said. Sustained capital outflows too aided the rupee decline, they added.
Alpari Forex (India) CEO Pramit Brahmbhatt said, “Rupee depreciated by about quarter per cent, mainly taking cues from local equities which closed down by almost 2 per cent and further dollar demand from oil importers helped dollar to gain. Euro and GBP also weakened against the greenback.” “Looking at the strong dollar one can expect Rupee to trade near 45.50 in coming days and the trading range for the USD/INR will be 44.80 to 45.30 tomorrow,” he added.
At the Interbank Foreign Exchange (Forex) market, the domestic unit opened nearly flat at 44.87/88 against last close of 44.86/87 a dollar. It later moved in a range of 44.85 and 45.06 before settling at 44.99/45.00.
Meanwhile, New York crude oil was trading below USD 92 a barrel. The dollar index was up against its major rivals in European market today.
India Forex Advisors CEO Abhishek Goenka said that the stock markets had an unprecedented impact on the rupee resulting in its depreciation.
The rupee sentiment was dampened as shares of telecom infrastructure firms GTL and GTL Infrastructure came under heavy selling pressure, amid rumours that their promoters have pledged more than 50 per cent of their stake, he added.
There were also rumours that one of the companies has failed to meet Foreign Currency Convertible Bonds (FCCB) repayment obligations, Goenka said and added, “Rupee will maintain a bearish bias targeting 45.25-45.30 levels.
The rupee premium for the forward dollar sharply lower on fresh receivings by exporters. The benchmark six-month forward dollar premium payable in November settled weak at 118-120 paise from 128-1/2-130-1/2 paise last Friday and Far-forward contracts maturing in May ended remarkably down at 219-221 paise from 239-241 paise previously.
The RBI has fixed the reference rate for the dollar at Rs 44.99 and the euro at Rs 64.01.
The rupee moved down further against the pound sterling to Rs 72.73/75 from last close of Rs 72.53/55 and also held weak against the Japanese yen at Rs 56.05/07 per 100 yen from Rs 55.88/90.
It, however, recovered to Rs 63.95/97 per euro from the previous close of Rs 64.02/04. PTI