* Indian shares post biggest daily fall since Feb. 27
* Potential review of Mauritius tax treaty, rupee weigh
* Nifty ends below 200-day moving average
By Manoj Dharra and Abhishek Vishnoi
MUMBAI, May 4 (Reuters) – Indian shares posted on Friday
their biggest daily fall since late February, on a session
marked by nerves about foreign selling after India said it plans
to review its tax break treaty with Mauritius and as the rupee
continued to weaken.
India is considering a review of its double taxation treaty
with Mauritius, Junior Finance Minister S.S. Palanimanickam said
on Friday, spooking investors given a majority of foreign
portfolio inflows are believed to be routed through the East
African country.
The potential end of the treaty would open up the prospect
of capital tax gains for those foreign investors who have a
legal presence in Mauritius.
The news comes as the finance ministry gets ready to submit
a bill containing controversial provisions on taxation for
foreign investors next week, under the so-called GAAR rules. The
government has promised critical concessions, but investors have
yet to be comforted.
The worries over foreign outflows are also being reflected
by a rupee that continues to plumb four-month lows, given the
deep concerns about India’s economic and fiscal challenges.
“GAAR is a serious concern for foreign investors. If India
changes the terms of tax treaty, then it will discourage
investors,” said Adrian Mowat, Chief Asian and Emerging Equity
Strategist for JP Morgan.
“India is the only country in MSCI indices that tax
institutional investors capital gains,” Mowat said .
The benchmark 30-share BSE index fell 1.87 percent
to 16,831.08 points, its biggest daily fall since Feb 27.
For the week, the SENSEX index fell 1.8 percent, its biggest
weekly fall since mid-April.
The 50-share NSE index ended down 1.96 percent at
5,086.85 points
Technicals for the Nifty are pointing to more falls ahead,
after closing below its March low of 5,136, and below the
200-day moving average for the first time since late January.
The index could target 5,081, or the 50 percent retracement
of the December 2011 to February 2012 rally. The next support is
seen at 4,951, the 61.8 pct retracement of those gains.
Foreign investors have sold a net of about 6.3 billion
rupees ($118.90 million) in April.
Still, they have been net buyers of 3.18 billion rupees so
far in May, according to provisional data, while they remain net
buyers of 437.01 billion rupees in the year-to-date.
Auto stocks were hit hard for the week after widespread
disappointment over their April sales.
Hero MotoCorp fell 4.61 percent on Friday,
marking a two-session drop of 11.5 percent, while Bajaj Auto
shares ended lower by 3.8 percent.
Banks were also routed after Fitch Ratings and Macquarie
said this week’s RBI directives on Basel III guidelines could
lead to a equity dilution of around $30-35 billion over the next
five years.
HDFC Bank lost 3 percent, while State Bank of
India retreated 4.22 percent.
Shares of Reliance Industries dropped 1.7 percent,
following media reports that India’s petroleum ministry has
struck down its plans to recover $1.2 billion in costs before
the energy major starts sharing profits with the government from
its gas field off the country’s east coast.
However, among gainers, drug maker Cipla added
2.63 percent after CLSA upgraded the stock to “outperform” from
“underperform”, because it expects “strong” operating
performance from Lexapro, an anxiety and depression drug, and a
weaker rupee.
For the full list of Indian shares that moved during the
day, please see MARKET EYE items.
FACTORS TO WATCH
* Euro dips on weak PMI but focus on U.S. jobs
* 3-Oil under $116; set for steep weekly fall
* Shares, oil dip before U.S. payrolls
* Foreign institutional investor flows
* For closing rates of Indian ADRs
ASIA-PACIFIC STOCK MARKETS:
Pan-Asia…….. Japan……. S.Korea…
S.E. Asia……. Hong Kong… Taiwan….
Australia/NZ…. India……. China…..
OTHER MARKETS:
Wall Street …. Gold ……. Currency..
Eurostocks….. Oil …….. JP bonds…
ADR Report ….. LME metals. US bonds..
Stocks News US.. Stocks News Europe
DIARIES DATA:
Indian Data Watch Asia earnings diary
U.S. earnings diary European diary
Indian diary Wall Street Week Ahead
Eurostocks Week Ahead
TOP NEWS:
For top Asian company news, double click on:
U.S. company news European company news
Forex news Global Economy news
Technology news Telecoms news
Media news Banking news
Politics/General news Asia Macro data
A multimedia version of Reuters Top News is available at:
LIVE PRICES DATA:
World Stocks Currency rates
Dow Jones/NASDAQ Nikkei
FTSE 100 Debt
Indian rupee LME price overview
(manoj.dharra@thomsonreuters.com)
Article source: http://www.reuters.com/article/2012/05/04/markets-india-stocks-idUSL4E8G456820120504
