Markets nosedives on rupee concern

Key benchmarks began the first day of the week on a negative note and have nosedived in late morning session taking cues from other Asian peers and the rupee weakness. The rupee fell to an all-time low of 61.09 per dollar, down 87 paise or 1.44 per cent against its previous close as strong US economic data led to outflows from debt and equities market. Rupee has lost 1.5 per cent in previous week and has been down for 10 straight weeks on concerns that the US Federal Reserve may taper down stimulus package. The rupee is likely to trade in a range of 59.5-63 in the near-term. The Indian markets may remain under pressure due to high crude oil prices with political tension in Egypt expected to put pressure on current account deficit. In the near term, quarterly earnings will be in focused. Bond yields also jumped on fears that foreign investors would continue to sell rupee debt. The 10-year yield rose as much as 13 basis points to 7.63 pct from its previous close. On the global front, All the Asian equity indices, barring Japanese Nikkei, were trading in the red at this point of time with Chinese market tumbling by over one and a half percent on Beijing’s plan to choke off credit to force consolidation in industries plagued by overcapacity as it seeks to end the economy's reliance on investment funded by cheap debt

Back home, the traders were seen piling up positions in Teck and Health Care, while selling was seen in PSU, Realty and Auto sector. In scrip specific developments, software and technology stocks edged higher as rupee hit record low against the dollar. A weak rupee boosts revenue of IT firms in rupee terms as the sector derives a lion's share of revenue from exports. In scrip specific actions, Ashok Leyland surged after the Hinduja flagship firm said it won an order for 2,610 buses from the Institute of Road Transport, Tamil Nadu. Reliance Communications soared as the telecom major is expected to spin off its real estate business into a separately listed unit, a move the country's No.3 mobile phone carrier by customers said was to focus on its core business. Tata Motors dropped after its Jaguar Land Rover production line in the United Kingdom may grind to a halt within weeks after delivery workers from DHL voted for strike, demanding a large pay rise and similar terms and conditions on par with the JLR staff. Wockhardt dipped on reports that UK medicines and Healthcare Products Regulatory Agency (MHRA), has imposed an alert on Wockhardt's export-oriented unit in Aurangabad. FreseniusKabi Oncology slumped after the pharmaceutical company said it has received a warning letter from the US health regulator asking for certain other information and implementation of more corrective and preventive measures regarding GMP non- conformities.

Meanwhile, the NSE Nifty and BSE Sensex were trying to retain the psychological 5,700 and 19,200 levels respectively. The market breadth on BSE was showing negative trend with advances to declines in ratio of 697:960. The BSE Sensex is currently trading at 19227.52, down by 268.30 points or 1.38% after trading in a range of 19422.69 and 19185.92. There were 7 stocks advancing against 23 declines on the index. The broader indices were trading in red; the BSE Mid cap index was down by 0.64% and Small cap index was down by 0.45%.

The top gaining sectoral indices on the BSE were, Teck up by 0.34% and Health Care up by 0.054% while PSU down by 2.22%, Realty down by 2.18%, Auto down by 2.07%, Oil & Gas down by 2.00% and Metal down by 1.88% were the top losers on the BSE. The top gainers on the Sensex were Dr Reddys Lab up by 0.91%, Infosys up by 0.76%, Cipla up by 0.73%, Wipro up by 0.73%, and Sun Pharma up by 0.34%.

On the flip side, Tata Motors was down by 4.22%, Coal India was down by 4.09%, HDFC was down by 3.51%, ICICI Bank was down by 2.58% and ONGC was down by 2.52% were the top losers on the Sensex.

Meanwhile, in order to plug loopholes, to allay India's concerns over the misuse of the double taxation avoidance agreement (DTAA), Mauritius, the nation from where India receives maximum foreign investments, has proposed to include a clause in the treaty to ensure only genuine investors from the island nation enjoy tax benefits.

Mauritius Minister of Foreign Affairs, Regional Integration and International Trade, Arvin Boolell said that Mauritius has put in place all necessary precautions, all necessary checks and balances to plug loopholes in DTAA. He said that the country had submitted proposals for insertion of limitation of benefit clause adding that the treaty should be responsive to the needs of both countries. Mauritius has submitted the proposals at the last joint working group in Delhi in March 2013. Now, the country is willing to insert an appropriate clause in the treaty to prevent any perceived abuse and to insure that there will no changes to the Article 13 of DTAA, which deals with the capital gains. The move will restrict the treaty benefit to only those investors that meet the conditions specified in the clause.

There have been concerns that Mauritius is being used for money laundering and round tripping of illicit funds as it accounts for almost half of the foreign money coming into India. The investors from the US, Europe and other places tend to route their capital flows into India through this Indian Ocean country to benefit from a favorable tax treaty and the ease of doing business here. Recently, Mauritius based entities also came to light in some cases of corruption and alleged tax evasion, which were suspected to have been set up by Indian entities to dodge the tax authorities in India.

The CNX Nifty is currently trading at 5,786.10 down by 81.80 points or 1.39% after trading in a range of 5,833.85 and 5,775.55. There were 9 stocks advancing against 41 declines on the index.

The top gainers of the Nifty were Cairn up by 2.54%, HCL Techup by 2.08%, Infosys up by 0.82%, Ultra Cement up by 0.82% and Cipla up by 0.75%.

On the flip side, BPCL down by 4.49%, JP Associate down by 4.22%, Tata Motors down by 4.20%, Coal India down by 4.08% and HDFC down by 3.55% were the major losers on the index.

Most of the Asian equity indices were trading in red; Shanghai Composite declined 32.38 points or 1.61% to 1,974.82, Hang Seng dropped 465.89 points or 2.23% to 20,388.78, Jakarta Composite slumped 119.50 points or 2.60% to 4,483.31, KLSE Composite decreased 5.69 points or 0.32% to 1,766.58, Straits Times contracted 18.40 points or 0.58% to 3,151.33, KOSPI Composite dropped 18.02 points or 0.98% to 1,815.29 and Taiwan Weighted was down by 108.27 points or 1.35% to 7,893.55.

On the flip side, Nikkei 225 rose 8.25 points or 0.18% to 4,498.12.