Markets wipe out opening gains to trade flat; Wipro jumps over 3%

Indian equity benchmarks started the May F&O series on optimistic note tracking strong global cues as most of the Asian markets are trading higher, following the broadly positive cues from Wall Street overnight, as the markets reacted positively to earnings-driven rally among US technology stocks and offset lingering concerns about the U.S. banking sector. Domestic indices failed to hold opening gains and soon turned flat weighted down by selling at Bankex, FMCG and Consumer Durables counters. Markets are trading flat with negative bias in early deals. Some cautiousness came in as Governor Shaktikanta Das said the Reserve Bank of India (RBI) is looking closely at banks’ business models to flag any deficiencies that could impact financial resilience, but added that domestic lenders can maintain minimum capital even under severe stress conditions.

However, broader indices - BSE Mid & small Cap - are outperforming larger peers with gains of over half a percent each as foreign fund inflows aided domestic sentiments. Foreign institutional investors (FII) bought shares worth Rs 1,652.95 crore on April 27, according to provisional data from National Stock Exchange. In stock specific developments, Wipro rallied amid report that the company has announced a Rs 12,000 crore share buyback after posting a mixed performance in terms of profitability for Q4.

The BSE Sensex is currently trading at 60607.74, down by 41.64 points or 0.07% after trading in a range of 60552.69 and 60772.61. There were 14 stocks advancing against 16 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.56%, while Small cap index was up by 0.61%.

The top gaining sectoral indices on the BSE were Telecom up by 2.06%, IT up by 0.93%, TECK up by 0.84%, Industrials up by 0.66%, Capital Goods up by 0.59%, while Bankex down by 0.44%, FMCG down by 0.37%, Consumer Durables down by 0.32%, Oil & Gas down by 0.26% were the top losing indices on BSE.

The top gainers on the Sensex were Wipro up by 3.45%, Tech Mahindra up by 1.08%, SBI up by 0.79%, Reliance Industries up by 0.78% and Sun Pharma up by 0.72%. On the flip side, Bajaj Finserv down by 2.62%, Axis Bank down by 1.91%, Hindustan Unilever down by 1.64%, Asian Paints down by 1.21% and Bajaj Finance down by 0.78% were the top losers.

Meanwhile, the Income Tax Department will soon notify rules specifying the class of investors and norm of valuation for implementation of the Budget provision of taxing foreign investment in unlisted companies. The modified valuation rules would provide for ascertaining the fair market value (FMV) of shares of unlisted companies to levy tax on non-resident investments. The Finance Act, 2023, has amended Section 56 (2)(viib) of the I-T Act, thereby bringing overseas investment in unlisted closely held companies, except DPIIT-recognised startups, under the tax net. The amendments are needed as I-T Act and FEMA provide different methodologies for calculating the FMV of shares of unlisted companies.

Rule 11UA deals with the determination of FMV of assets, other than immovable property. Under the existing norms, only investments by domestic investors or residents in closely held companies were taxed over and above the fair market value. This was commonly referred to as an angel tax. The Finance Act, 2023, has said that such investments over and above the FMV will be taxed irrespective of whether the investor is a resident or non-resident. The provisions would come into effect from April 1. The startup and venture capital industry has sought exemption for certain overseas investor classes. The finance ministry, in the rules, is expected to specify to which investor class these modified tax rules would be applicable.

However, no tax would be levied on investments in startups, which meet the prescribed norms and are recognised by the Department for Promotion of Industry and internal trade (DPIIT). Post the amendments proposed in the Finance Bill, concerns have been raised over the methodology of calculation of fair market value under two different laws. FEMA regulations mandate that issue of a capital instrument by an Indian company shall not happen at any value less than Fair Market Value computed as per FEMA laws. Under I-T law, the tax would be levied on any excess price recovered over and above Fair Market Value (calculated as per the income tax laws) on issuing shares to a non-resident. Suppose the FMV of a share computed under FEMA law is Rs 100, whereas under income tax is Rs 80.

The CNX Nifty is currently trading at 17911.75, down by 3.30 points or 0.02% after trading in a range of 17895.25 and 17957.95. There were 29 stocks advancing against 21 stocks declining on the index.

The top gainers on Nifty were Wipro up by 3.39%, Apollo Hospital up by 1.76%, Tech Mahindra up by 1.25%, UPL up by 1.15% and Hero MotoCorp up by 0.97%. On the flip side, Bajaj Finserv down by 2.54%, Axis Bank down by 1.93%, Hindustan Unilever down by 1.70%, ONGC down by 1.34% and Asian Paints down by 1.27% were the top losers.

Asian markets are trading mostly in green; Nikkei 225 surged 206.05 points or 0.72% to 28,663.73, Hang Seng advanced 167.64 points or 0.84% to 20,007.92, Taiwan Weighted added 122.34 points or 0.79% to 15,533.83, Shanghai Composite strengthened 21.92 points or 0.66% to 3,307.80, KOSPI increased 0.47 points or 0.02% to 2,496.28. On the other hand, Jakarta Composite fell 11.59 points or 0.17% to 6,933.89 and Straits Times was down by 6.5 points or 0.2% to 3,275.53.