Stock Market

Nifty hovers around 7850; investors cautious on Mauritus treaty

Chillicious Team

9:55am Interview:

Economic Affairs Secretary Shaktikanta Das says this treaty addresses concerns with regard to round-tripping of unaccounted wealth into India. Das is positive there will now be a surge in FDI flows into the country before April 2017. Recently, the finance minister stuck to the time-frame on General Anti-Avoidance Rules (GAAR) announced in his Budget speech last year. He had said it would be implemented from April 1, 2017. Das said there will be no conflict between GAAR and this latest treaty. Infact, GAAR will take note of this treaty, he added.

9:45 am FII view:
The amendment made the government to tweak its tax treaty with Mauritius may be well-intentioned but it could hamper foreign investors’ access to the Indian markets, says Arvind Sanger of New York-based Geosphere Capital.

Sanger was commenting on the government’s decision yesterday to tweak the Mauritius DTAA treaty that would give India the right to tax capital gains on investments originating from the tax haven.

He added that instruments such as participatory notes, which allow foreign investors to skip registration with Sebi to invest in India, may take a hit and that the regular route of investments was too cumbersome for FIIs.

9:30 am Market check: The market has quickly recovered after a very weak opening. The Sensex is down 144.51 points or 0.6 percent at 25628.02, and the Nifty down 41.85 points or 0.5 percent at 7845.95. About 437 shares have advanced, 847 shares declined, and 68 shares are unchanged. 

Hindalco, Axis Bank, NTPC, Hero and Maruti are top gainers while Tata Motors, Bharti, BHEL, Coal India and Adani Ports are losers in the Sensex.

Don’t miss: See surge in FDI flows before Apr 2017:Shaktikanta Das

The market slipped at the opening on Wednesday. The Sensex is down 339.95 points at 25432.58, and the Nifty is down 99.75 points at 7788.05. About 142 shares have advanced, 649 shares declined, and 24 shares are unchanged. 

Indian government amended a long-standing tax treaty with Mauritius that plugs loopholes in the system and aims to check tax evasion. The amendment to the Mauritius Double Tax Avoidance Agreement, which comes into effect April 1, 2017, will give India the right to tax capital gains from investments coming from the tax haven.

Tax lawyers said that while the move may have a short-term negative impact on market sentiment, given the fact that about USD 33 billion of inflows come into India via the controversial participatory-notes route, more sharing of information would be a long-term positive.

Coal India, Tata Motors, BHEL, Bharti Airtel and Adani Port are the top losers, while Hindalco, NTPC and Zee Entertainment are the top gainers.

Don’t Miss :  A look at Double Taxation Avoidance Agreement with Mauritius

Asia markets gave up much of their early gains on Wednesday to trade lower as the yen nudged higher against the dollar and oil prices retreated.

US stocks rose across the board on Tuesday, with a jump in oil and a rally in helping propel the S&P 500 to its best day in two months.

The Dow Jones industrial average climbed 1.26 percent to end at 17,928.35 and the S&P 500 jumped 1.25 percent to 2,084.39. The Nasdaq Composite added 1.26 percent to 4,809.88.

The Indian rupee opened lower by 13 paise at 66.80 per dollar on Wednesday versus 66.67 Tuesday.

Bansi Madhavani of India Ratings said, “Medium-term outlook of rupee hinges on global developments, while earnings and flows’ position will dictate the near-term range.”

“Rupee is likely to stay in the range of 66.10-66.90/dollar in the interim,” he added.