Mumbai: Reports that the government is looking to re-negotiate a tax treaty agreement with Mauritius spooked local equities. The Central Board of Direct Taxes Chairman, over the weekend, has said that the Mauritius has agreed to review Double Taxation Avoidance Agreement with India.
After a flat opening, the benchmark indices soon plunged by more than 3% on speculation that the government’s move to review tax treaty agreement with Mauritius might hit foreign capital inflows. Due to the tax advantage, a large number of foreign investors route money through Mauritius. While the government clarified that it was not reviewing the tax treaty immediately, fears that the investors routing money through Mauritius will lose tax advantage led to a selling in Indian equities.
Sensex: 17,506 –2.04%
Nifty: 5,257 –2.02%
Shares of Anil Dhirubhai Ambani group companies-Reliance Communications and Reliance Infrastructure plunged by more than 6% each after the BSE said it would drop them from the benchmark stock index, Sensex. The negative sentiment also led to selling in Reliance Capital and Reliance Power stocks.
Reliance Communications: Rs 87 –8.35%
Reliance Infrastructure: Rs 545 –6.16%
Reliance Capital: Rs 518 –5.06%
Reliance Power: Rs 110 –4.46%
Apart from ADAG stocks, selling was also visible in oil & gas, metals and information technology stocks. Index heavyweights Reliance Industries and Tata Motors fell by more than 4% each on concerns that a slowing global economy might impact earnings.
Grasim Industries: Rs 2,007 –4.73%
Cairn India: Rs 309 –4.73%
Tata Motors: Rs 936 –4.58%
Reliance Industries: Rs 833 –4.10%
Meanwhile, Bharti Airtel surged 2.40% after an industry body report said it added 2.45 million mobile subscribers in May. Bharti’s market share in new subscriber additions has increased from 21.7% in April to 25.7% in May this year.
Bharti Airtel: Rs 389 +2.40%
All BSE sectoral indices closed the day with losses. CLSA downgraded the Indian information technology services sector to underweight citing lack of positive triggers and warned that a downtrend in earnings is likely. It downgraded TCS and Infosys to under-perform rating.
BSE Realty: 2,016 –4.16%
BSE Oil & Gas: 8,668 –3.42%
BSE Information Technology: 5,673 –2.50%
BSE Auto: 8,256 –2.46%
Real estate stocks tanked on concerns that slowing growth and high interest rates might impact property sales. According to Prabhudas Lilladher, Mumbai home sale registrations fell for 10th month in May as higher interest rates and home prices crimped demand. According to the brokerage, registered sales declined 1% to 5,287 units in May from a year earlier. The weak numbers led to selling in the stocks of Mumbai based real estate companies.
HDIL: Rs 160 –7.75%
Indiabulls Real Estate: Rs 103 –6.85%
Orbit Corporation: Rs 40 –6.84%
Peninsula Land: Rs 50 –6.21%