Tax worries drag rupee to over 1-mth low, stocks slip

By Neha Dasgupta and Abhishek Vishnoi

MUMBAI (Reuters) - Fresh fears over the impact of retrospective taxation rattled foreign investors and Indian markets on Monday, traders said, as stocks fell for a fourth consecutive day and the rupee hit its weakest in more than a month.

The Sensex fell as much as 2.25 percent, its biggest fall since March 26. The index provisionally ended down 1.95 percent, while the Nifty fell 1.83 percent.

While Prime Minister Narendra Modi's government had said it would move towards a tax-friendly regime to boost much needed foreign investment in India, media reports over the weekend said tax authorities have sent fresh notices to some companies including Vodafone Group .

Funds themselves are already fretting over unexpected tax bills, as asset managers receive demands for minimum alternative tax (MAT) - a form of corporate taxation on profits.

"There are funds which have received tax notices from the government. Who would bear the cost - asset managers or investors?" a fund manager with a foreign bank told Reuters.

Broad global dollar strength also added to the fall in the rupee.

At 0959 GMT, the partially convertible rupee was trading at 62.8250/8350 per dollar after falling to 62.9150, its lowest since March 16. The currency posted its biggest intraday fall since Dec. 16.

The rupee had closed at 62.36/37 on Friday.

There was some talk that state-owned banks had sold dollars on behalf of the central bank to cap the rupee's fall around 62.90 levels, three traders said on Monday.

(Editing by Subhranshu Sahu)