Indian equities add losses in the late afternoon session

Indian equities added losses to continue its weak trade hovering near the lowest point of the day in the late afternoon session on account of selling in frontline blue chip counters. The markets witnessed choppiness in trades, ahead of Thursday's futures and options (F&O) expiry. Traders were seen piling up position in FMCG, Health Care and Capital Goods sector while selling was witnessed in Consumer Durables, Bankex and Realty sector. Sentiments remained sluggish in the session as market participants searched for fresh catalysts to take further bets in the markets. ICICI Bank, Kotak Bank, SBI, Axis Bank, HDFC Bank and PNB from Banking sector was seen trading in red drifting markets lower. DLF from Realty counter was seen trading weak in red exerting pressure on the market. ITC from FMCG counter was seen trading in green pulling the markets higher. L&T from Capital Goods space was too trading in green pushing the markets up. In the scrip specific development, Anil Dhirubhai Ambani (ADA) Group companies like Reliance Capital, Reliance Communications, Reliance Infrastructure, Reliance Power, Reliance Mediaworks and Reliance Broadcast Network were seen trading weak in red. Vijay Mallya promoted UB Group companies - United Breweries (Holdings), United Breweries, United Spirits and Kingfisher Airline were seen trading firm in green on reports that Vijay Mallya and Heineken are in final stages of the negotiations and due diligence for stake sale.

On the global front, Asian markets were trading in red barring Taiwan Weighted while the European markets were trading on a mix note. On the home turf, the NSE Nifty and BSE Sensex were trading above their psychological 5,200 and 17,100 levels respectively. The market breadth on BSE was in favor of declines in the ratio of 886:1867 while 111 scrips remained unchanged.

The BSE Sensex is currently trading at 17,125.85 down by 131.51 points or 0.76% after trading as high as 17,245.82 and as low as 17,113.41. There were 8 stocks advancing against 22 declines on the index.

The broader indices were trading on a weak note; the BSE Mid cap index slipped 0.59% while Small cap sank 0.78%.

On the BSE sectoral space, FMCG up 0.41%, Healthcare up 0.21% and Capital Goods up 0.12% were the only gainer, while Consumer Durables down 3.06%, Bankex down 1.67%, Realty down 1.61%, IT down 1.03% and PSU down 0.96% were the major losers in the space.

Tata Steel up 1.75%, Gail India up 0.90%, ITC up 0.71%, L&T up 0.69% and Bharti Airtel up 0.44% were the major gainers on the Sensex, while SBI down 2.34%, ICICI Bank down 2.28%, Sterlite Industries down 2.28%, Hindalco Industries down 2.21% and NTPC down 1.61% were the major losers in the index.

Meanwhile, clarifying the government’s stand on the controversial General Anti Avoidance Rules (GAAR), the Finance Minister, Pranab Mukherjee said ‘India is not a no-tax country, India has a determined tax rate, but it is not a tax haven ... If you pay tax in your country of origin, you don't have to pay tax, if we have double taxation agreement with your country of origin.’ By adding further he said, GAAR will be examined and modified as and when required, as this is essential for anti-avoidance.

Mukherjee further clarified that the intent of legislature is that there should not be double taxation but no outflow of revenue either. Of late there have been a lot of apprehensions raised over the implementation of GAAR. There were fears that the Participatory Notes - an instrument through which FIIs unregistered with SEBI invest in stock markets, would be taxed. Other concerns were regarding the power given to tax officials to re- open cases retrospectively.

However, the government has come forward and explained that GAAR is not being implemented with a vindictive intent. Also it has not been created to target any class of financial instruments. Moreover there is no room for apprehension as cases beyond six years cannot be re-opened. Provisions of GAAR will be applicable from April 1 and not with retrospective effect.

Defending the government's proposal to amend the Income Tax Act with retrospective effect, the FM stated that double taxation avoidance agreements (DTAAs) are meant for genuine investors who are required to pay in only one of the contracting countries. However, they cannot be used as instruments to avoid taxation.

It may be noted that all benefits which a person is entitled in a DTAA (Double Taxation Avoidance Agreement) treaty can be overruled or denied if GAAR is invoked. The fear of GAAR had spooked stock markets which tanked 2% yesterday on concerns that all short-term capital gains made by FII and P-Note investments would be taxed. The Sensex, however, recovered today rising over 200 points.

In the Union Budget for 2012-13, Mukherjee had said that the government wanted to introduce GAAR in order to ‘counter aggressive tax avoidance schemes, while ensuring that it is used only in appropriate cases, by enabling a review by a GAAR panel.’

The S&P CNX Nifty is currently trading at 5,202.15, lower by 41.00 points or 0.78% after trading as high as 5,236.55 and as low as 5,192.15. There were 13 stocks advancing against 36 declines while 1 stock remained unchanged on the index.

The top gainers on the Nifty were Ranbaxy up 2.89%, Tata Steel up 1.73%, Dr Reddy’s up 1.43%, GAIL up 1.22% and L&T up 0.87%.

JP Associates down 4.37%, Cairn down 3.96%, Sesa Goa down 2.71%, Reliance Power down 2.59% and ICICI Bank down 2.43% were the major losers on the index.

In the Asian space, Shanghai Composite got butchered 2.65%, Hang Seng plunged 0.77%, Jakarta Composite eased 0.01%, KLSE Composite dropped 0.26%, Nikkei 225 declined 0.71%, Straits Times fell 0.28% and Seoul Composite slipped 0.39%. On the other hand only Taiwan Weighted gained 0.11%.

The European markets were trading on a mix note with, France’s CAC 40 eased 0.14%, Germany’s DAX gain 0.18% and Britain’s FTSE 100 inched up 0.01%.