Weak global cues drag benchmarks lower in morning trade

Pressurized by weak global cues, Indian equity benchmarks have made a gap-down opening and are trading with a cut of around half a percent in early deals. Traders remained cautious ahead of the expiry of October derivative contracts today. Sentiments also remained dampened with report that foreign institutional investors were net sellers in equities worth Rs 1,451 crore on Wednesday, as per provisional stock exchange data. Market participants failed to get any sense of relief with report that Prime Minister Narendra Modi has asked secretaries at the Centre and chief secretaries in the state to analyse the World Bank's Ease of Doing Business Report.

On the global front, most of the Asian equity indices were trading in red at this point of time weighed down by weakness in the US markets overnight and slump in the oil prices. The US markets made a mixed closing in last session as traders weighed a flurry of earnings news, including downbeat results from Apple and Southwest. Back home, banking stocks remained under pressure on account of disappointing Q2 numbers from Axis bank, Canara Bank and Syndicate Bank. Shares of Tata Group companies remained under selling pressure for the third straight trading sessions, after Tata Sons’ ousted Chairman Cyrus Mistry said that Tata Group faces additional writedowns.

The BSE Sensex is currently trading at 27716.39, down by 120.12 points or 0.43% after trading in a range of 27709.49 and 27843.62. There were 7 stocks advancing against 23 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index declined 0.69%, while Small cap index was down by 0.24%.

The only gaining sectoral indices on the BSE were FMCG up by 0.34% and Healthcare up by 0.14%, while Bankex down by 1.17%, Telecom down by 1.12%, Auto down by 0.85%, TECK down by 0.81% and IT was down by 0.80% were the top losing indices on BSE.

The top gainers on the Sensex were ITC up by 1.59%, Dr. Reddys Lab up by 1.06%, Sun Pharma up by 1.03%, ONGC up by 0.41% and GAIL India up by 0.36%. On the flip side, SBI down by 1.76%, Tata Motors down by 1.74%, Asian Paints down by 1.64%, Wipro down by 1.59% and Hero MotoCorp down by 1.48% were the top losers.

Meanwhile, in order to avoid double taxation, India has notified the revised Double Tax Avoidance Agreement (DTAA) with South Korea under which capital gains tax will be levied at the source. Provisions of the new DTAA will have effect in India in respect of income derived in fiscal year beginning from April 1, 2017. The revised DTAA was signed on May 18, 2015 and was notified on September 12, 2016, on completion of procedural requirements by both the countries.

The Central Board of Direct Taxes (CBDT) said that the revised DTAA aims to avoid the burden of double taxation for taxpayers of two countries in order to promote and stimulate flow of investment, technology and services between India and Korea. It will provide tax certainty to the residents of India and Korea. The existing DTAA, which has been in vogue for three decades, provides for residence-based taxation of capital gains on shares, which means taxes were to be paid where the investor was a resident. The revised DTAA provides for source based taxation of capital gains arising from alienation of shares comprising more than 5% of share capital.

In order to promote cross border flow of investments and technology, the revised DTAA provides for reduction in withholding tax rates from 15% to 10% on royalties or fees for technical services and from 15% to 10% on interest income. The treaty also allows investors to invoke Mutual Agreement Procedure (MAP) in transfer pricing disputes as well as apply for bilateral Advance Pricing Agreements (APAs). It provides for exchange of information, including by financial institutions. Information exchanged under the revised DTAA can now be used for other law enforcement purposes with authorization of information supplying country.

CBDT further said that to facilitate movement of goods through shipping between two countries and in accordance with international principle of taxation of shipping income, the revised DTAA provides for exclusive residence-based taxation of shipping income from international traffic. The reworked DTAA inserted new Article for assistance in collection of taxes between tax authorities. It also inserted new Limitation of Benefits Article i.e. anti-abuse provisions to ensure the benefits of the agreement are availed only by the genuine residents of both the countries.

The CNX Nifty is currently trading at 8567.95, down by 47.30 points or 0.55% after trading in a range of 8566.15 and 8609.90. There were 8 stocks advancing against 43 stocks declining on the index.

The top gainers on Nifty were ITC up by 1.63%, Dr. Reddys Lab up by 1.21%, Sun Pharma up by 1.18%, Aurobindo Pharma up by 0.70% and HDFC up by 0.39%. On the flip side, Bharti Infratel down by 3.04%, Yes Bank down by 2.70%, Tata Motors - DVR down by 2.50%, Tata Power down by 2.23% and HCL Tech. down by 1.97% were the top losers.

Asian markets were trading mostly in red; Hang Seng declined 268.81 points or 1.15% to 23,056.62, Nikkei 225 decreased 79 points or 0.45% to 17,312.84, Taiwan Weighted shed 45.82 points or 0.49% to 9,316.43, Shanghai Composite slipped 10.5 points or 0.34% to 3,105.81 and FTSE Bursa Malaysia KLCI was down by 5.76 points or 0.34% to 1,668.16.

On the flip side, KOSPI Index increased 7.01 points or 0.35% to 2,020.90 and Jakarta Composite was up by 19.5 points or 0.36% to 5,419.18.