Tax talk clarification soothes market fears

The markets have recovered smartly from the day's low as the Finance ministry sources clarified on the news related to the Mauritius Tax Treaty. The said sources told TV channel, that the timeline on the talks is yet to be decided.

Following which, the Sensex has recovered smartly from the low of 17,315 and is currently down 340 points at 17,537. The Nifty is lower by over 100 points at 5,262.

Earlier the markets crashed after TV reports, that the government is likely to resume tax treaty talks with Mauritius. Stocks like KS Oils (down 19%), Alok Industries (down almost 8%), Deccan Chronicle (up marginally), Lanco Infra (down 4%), S Kumars (down over 7%), Cipla (down 4%), Dr Reddy’s (down 1.5%), Grasim (down nearly 5%) came under pressure and collapsed. These stocks have recovered some bit in the last one hour.

However later, CNBC-TV18 quoted government sources saying there is nothing new in Mauritius seeking to review tax treaty, but there is not timeline. Agencies quoted CBDT sources saying Mauritius was willing to resume tax treaty talks three months ago and the government is yet to start talks.

Market volatility has jumped over 11% at 22.55. Market breadth continues to be extremely negative with only 406 stocks advancing against 2,063 declining ones.

Broader markets have also recovered a bit but continue trading lower. CNX Midcap Index is down nearly 145 points and BSE Small Cap is down 220 points.

RIL and Infosys, down 1.5%, each, continue to drag Sensex by almost 30 points each. TCS (down 2%) and HDFC Bank (down 1.5%), pulled Sensex down by nearly 20 points each. Tata Motors, ITC and ONGC are other laggards, down 1-2%.

All sectoral indices have shed close to 2%. Metal is the biggest loser, followed by capital goods, oil & gas and auto.

Reliance Infra and Reliance Communication are the biggest Nifty losers, down almost 4.5% each. HCL Tech, Cairn, IDFC, ACC are the other notable losers.

Asian markets are mixed, with Shanghai down over 0.5%, Hang Seng down marginally, Nikkei and Straits Times up marginally and Taiwan down over 1%.