Equity markets dip over amended Mauritius tax treaty

MUMBAI, May 11: Key Indian indices plunged on Wednesday as an amended tax treaty between India and Mauritius spooked investors amid fears of a massive outflow of foreign capital from the equity markets.

Consequently, the key indices of the Indian equity markets closed the day’s trade in the red. Heavy selling pressure was witnessed in automobile, healthcare and the information technology (IT) stocks.

The wider 51-scrip Nifty of the tiol Stock Exchange (NSE) edged lower by 38.95 points, or 0.49 per cent, at 7,848.85 points.

The barometer 30-scrip sensitive index (Sensex) of the BSE, which opened at 25,548.97 points, closed at 25,597.02 points  down 175.51 points or 0.68 per cent from the previous close at 25,772.53 points.

The Sensex touched a high of 25,762.49 points and a low of 25,409.24 points during the intra-day trade.The BSE market breadth was skewed in favour of the bears  with 1,483 declines and 1,075 advances.Both the key indices had ended on a margilly positive note during the previous trade session on Tuesday. The barometer index had risen by 83.67 points or 0.33 per cent, while the NSE Nifty gained only 21.75 points or 0.28 per cent.Initially, the equity markets opened on a negative note, as investors were spooked after the government on Tuesday announced amendments to the DTAA (Double Taxation Avoidance Agreement) with Mauritius.

The amended DTAA has increased the potential of a massive outflow of foreign funds from the equity markets. Mauritius is a major source of foreign investments into the Indian equity markets.

Besides, investors were seen cautious ahead of the release of key domestic macro-economic data such as CPI (Consumer Price Index) and IIP (Index of Industrial Production).

In addition, release of quarterly results from the banking sector and negative European markets stroked volatility.

However, markets pared some of its losses on the back of value buying after the initial correction.

“The potential of FIIs’ outflows from India due to the amendment of the tax treaty with Mauritius spooked investors,” And James, chief market strategist, Geojit BNP Paribas Fincial Services, told IANS.

“Investors were seen cautious ahead of the release of banks’ fourth quarter results and the key-macro economic data.”

Vaibhav Agarwal, vice president and research head at Angel Broking said that in overseas stock markets, energy producers led the decline in European stocks as crude oil prices fell.

“Asian stocks witnessed a mixed trend. Going forward markets are expected to be volatile due to various global cues,” Agarwal said.

According to Nitasha Shankar, senior vice president for research with YES Securities, Indian VIX (volatility index) rose three per cent portending to volatile sessions ahead.

“Broader markets also ended trade margilly lower in line with the headline indices,” Shankar noted.

“Media and private sector bank indices ended in the green, while all other sectorial indices ended in the red.”

During the day’s trade, the foreign institutiol investors (FIIs) turned into net sellers, while the domestic institutiol investors (DIIs) turned into net buyers.

Data with stock exchanges showed that the FIIs sold stocks worth Rs 362.19 crore, while the DIIs purchased scrip worth Rs 729.59 crore.

Sector-wise, except for the scrip of consumer discretiory goods and services and basic materials, all the sub-indices came under selling pressure.

The S&P BSE automobile index plunged by 97.93 points, followed by the healthcare index, which declined by 93.48 points; and the IT index fell by 81.08 points.

Conversely, the S&P BSE consumer discretiory goods and services index gained by 9.32 points and the basic materials index rose by 7.82 points.Major Sensex gainers during Wednesday’s trade were Axis Bank, up 2.16 per cent at Rs 498.40; Maruti Suzuki, up 1.12 percent at Rs 3,889.85; Asian Paints, up 0.97 per cent at Rs 907.40; Larsen and Toubro (L&T), up 0.41 percent at Rs 1,324; and Tata Steel, up 0.32 per cent at Rs 329.

Major Sensex losers were Bharti Airtel, down 2.55 per cent at Rs 359.45; State Bank of India (SBI), down 2.30 per cent at Rs 184.95; Tata Motors, down 2.26 per cent at Rs 380.10; Dr.Reddy’s Lab, down 2.02 per cent at Rs 2,869.20; and BHEL, down 1.87 per cent at Rs 126.25. (IANS)