Mumbai: Indian stock markets and the rupee pared all losses on Friday after a Bloomberg report said the government may soon roll back surcharge on foreign investors.

The benchmark Sensex and Nifty fell nearly 1% to hit a six-month low, while the Indian currency weakened past the 72-per-dollar mark for the first time in 2019 to hit fresh eight-month low.

At 10.36am, Sensex was trading at 36516.92 point, up 0.13% from its previous close, while Nifty rose 0.11% to 10753.70 points. The domestic currency was trading at 71.85 a dollar, down 0.02%.

The government is working on steps to arrest the slowdown in the economy, Bloomberg reported quoting official. That may include an exemption for foreign portfolio investors (FPIs) from tax on super rich announced in the Budget.

Finance Minister Nirmala Sitharaman had proposed increasing the effective tax rate on individuals with taxable annual income of above 2 crore by about 3%, and for those earning above 5 crore by 7%. FPIs became an unintended target of the move.

Investors also exercised caution ahead of the speech by Federal Reserve chairman Jerome Powell and await possible clues on interest rate cuts.

The world’s central bankers have gathered at Jackson Hole to discuss economic and monetary policy. The event started Thursday and will end on Saturday. Powell will speak on Friday and traders will look for guidance on whether the central bank might cut rates at its next policy review meeting in September.

Several Federal Reserve officials have voiced their opposition to lowering of interest rates before Powell’s speech at Jackson Hole. Three Fed policy makers were against the notion that the US economy needs lower interest rates, and a fourth member said he wanted to avoid taking further action “unless we have to", foreshadowing a sharp debate with officials who want to cut rates again.

"The recent fall (in equities) is a result of growing uneasiness among the participants as they’re keenly awaiting some action from the government to boost the market sentiment. Besides, feeble global cues are further adding to the negativity", said Ajit Mishra Vice President, Research, Religare Broking Ltd.

Mishra said Nifty has now reached closer to its immediate and critical support of 10750 points so there may be some consolidation or a pause ahead. He has suggested continuing with the “sell on rise" approach and focusing more on stock selection.

Edelweiss Financial Services Ltd fell 6% after a report in the Business Standard said the Enforcement Directorate (ED) was examining an investment of 450 crore made by Edelweiss Asset Reconstruction Company (ARC) in Kohinoor CTNL Infrastructure.

Private banking stocks also ticked lower, with Indusind Bank down 2.5%, ICICI Bank declining 2.3%, Kotak Mahindra Bank falling 1.5%, HDFC Bank declining 1.2%, and Axis Bank down 0.6%.

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