Concerns that future equity inflows into India would be hit in the aftermath of amendments to the bilateral India-Mauritius tax treaty weighed on the domestic bourses. At 10:17 IST, the barometer index, the S&P BSE Sensex was down 100 points or 0.39% at 25,672.53. The Nifty 50 index was currently down 26.05 points or 0.33% at 7,861.75. Mauritius is the top source of foreign funds into India. Nonetheless, both these key benchmark indices staged a rebound from an initial steep slide as market took solace from the so-called grandfathering of investments made in India from Mauritius before 1 April 2017.
The Sensex declined 60.97 points or 0.23% at the day's high of 25,711.56 in morning trade. The barometer index lost 363.29 points or 1.4% at the day's low of 25,409.24 at the onset of the trading session, its lowest level since 9 May 2016. The Nifty dropped 14.20 points or 0.18% at the day's high of 7,873.60 in morning trade. The index lost 106.90 points or 1.35% at the day's low of 7,780.90 at the onset of the trading session, its lowest level since 9 May 2016.
As per the amendments to the bilateral India-Mauritius tax announced by India's finance ministry after trading hours yesterday, 10 May 2016, with effect from 1 April 2017 capital gains tax will be levied on sale of shares in India from a resident of Mauritius. There will be a benefit of 50% reduction in tax rate during the transition period from 1 April 2017 to 31 March 2019 subject to the Limitation of Benefits Article, whereby a resident of Mauritius (including a shell/conduit company) will not be entitled to the benefit of 50% reduction in tax rate if it fails the main purpose test and bonafide business test. A resident is deemed to be a shell/ conduit company, if its total expenditure on operations in Mauritius is less than Rs 27 lakh (Mauritian Rupees 1,500,000) in the immediately preceding 12 months. Taxation in India at full domestic tax rate will take place from financial year 2019-20 onwards.
In overseas stock markets, Asian stocks witnessed a mixed trend. US stocks registered broad based gains yesterday, 10 May 2016, as oil prices rallied.
Closer home, the market breadth indicating the overall health of the market was negative. On BSE, 911 shares fell and 658 shares rose. A total of 97 shares were unchanged. The BSE Mid-Cap index was currently up 0.09%, outperforming the Sensex. The BSE Small-Cap index was currently down 0.1%. The fall in this index was lower than the Sensex's decline in percentage terms.
Realty stocks declined. Sobha (down 0.79%), Indiabulls Real Estate (down 2.18%), Unitech (down 1.12%), Housing Development & Infrastructure (HDIL)(down 1.62%), DLF (down 1.1%), and D B Realty (down 2.95%) edged lower.
Most auto stocks also declined. Mahindra & Mahindra (M&M) (down 0.47%), Ashok Leyland (down 0.29%), Eicher Motors (down 0.84%), Hero MotoCorp (down 0.02%), and Bajaj Auto (down 0.58%) declined. TVS Motor Company (up 0.1%) and Maruti Suzuki India (up 0.36%) gained.
Automotive Axles rose 4.49% after net profit surged 119.39% to Rs 10.86 crore on 22.87% rise in net sales to Rs 311.64 crore in Q4 March 2016 over Q4 March 2015. The result was announced after market hours yesterday, 10 May 2016.
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