D-Street takes a turn for the worse amid Mauritius DTAA confusion; deposes 2%

It turned out to be a tumultuous session for the Indian equity markets amid the buzz that India will by pushing for removal of tax concessions in the tax treaty with Mauritius, which prompted panic selling by investor community at large. After the initial knee-jerk reaction to the reports, the benchmarks got battered to the lowest point in the session drifting over three percentage points and tested the psychological 5,200 and 17,300 levels. The reports acted as a trigger to trim down positions in this environment where earnings have been downgraded, interest rates are rising, and inflation is still at high levels with lots of global issues. However, a short covering rally emerged soon after some clarification on the news related to the Mauritius Tax Treaty. Later in the session the Finance Secretary too clarified that no meet has been planned for now with Mauritius on capital gains tax and that there was no reasons for markets to panic however, by the time the damage was already been done. Meanwhile, experts were of the belief that the focus would be more towards information exchange between India and Mauritius to deal with issues regarding round tripping, and not particularly to withdraw the capital gains tax exemption to Mauritius resident entities. While on the global front, leads from the markets across the world were subdued as investors remained frustrated that European finance ministers were unable to reach a concrete solution to the Greek crisis despite meeting over the weekend. Amid the hefty position squaring, investors also overlooked the plunge in international crude oil prices over the weekend, which may ease the inflationary pressure to some extent.

Domestic benchmarks seem to have taken turn for the worse after being decimated by close to two percentage points and extending the sorrow of closing in the negative terrain for the fourth straight session. The NSE's 50-share broadly followed index Nifty, got decimated by over a hundred points and settled above the crucial 5,250 support level while Bombay Stock Exchange's Sensitive Index, Sensex got lacerated by over three hundred fifty points and closed just above the important psychological 17,500 level. The broader markets too failed to recuperate the hefty losses incurred in the morning session and finished with large cuts. The midcap index got pulverized by 3.18% points while the smallcap index got clobbered by 3.26% point. On the sectoral front, it was the high beta Realty counter which languished at the bottom of the table with massive 4.16% of losses as majors like HDIL and Unitech nosedived by 7.75% and 4.15% respectively. While the oil and gas counter sector too bore the brunt of selling pressure and shaved off 3.42% as heavyweight Reliance Industries plunged by close to four percent point. Reliance Industries, which carries the highest weight on the Sensex, extended its decline for the seventh successive session to multi month low level. Stocks like GTL and GTL Infrastructure plunged by 62% and 42% respectively after multiple factors like company's higher debt, scrapping of fund raising plan and the Mauritius government's tax treaty plan with India, prompted investors to take profits off the table. ADA group stocks too took nasty cut on the back of stocks like R Com and R Infra being removed from the benchmark Sensex index. The markets declined on extremely large volumes of over Rs 1.85 lakh crore while the turnover for NSE F&O segment also remained on the higher side compared to Friday at over 1.70 lakh crore. Market breadth remained abysmal as there were 554 shares on the gaining side against 2286 shares on the losing side while 80 shares remained unchanged.

Finally, the BSE Sensex plunged by 363.90 points or 2.04% to settle at 17,506.63 while the S&P CNX Nifty dropped 108.50 points or 2.02% to settle at 5,257.90.

The BSE Sensex touched a high and a low of 17,925.17 and 17,314.38, respectively. The BSE Mid cap and Small cap index were down by 3.18% and 3.26% respectively.

The major gainers on the Sensex were Bharti Airtel up 2.35%, Hindustan Unilever up 0.36% and Hero Honda up 0.16%.

On the flip side, Reliance Communication down 7.89%, Reliance Infra down 6.07%, Tata Motors down 5.15%, Reliance down 3.89% and TCS down 3.69% were the top losers on the index.

There was no gainer on the BSE sectoral space, while the major losers in the space were Realty down 4.16%, Oil & Gas down 3.42%, IT down 2.50%, Auto down 2.46% and Power down 2.28%.

Meanwhile, In order to set up an ambitious project of transmission and distribution of electricity among the eight northeastern states, the union ministry of power has submitted the Rs 11,348.5 crore proposal or $2.5 billion to the World Bank, urging it to fund the power projects. The North Eastern Council (NEC) members also discussed the power scenario, under-construction projects and future electricity generation plan in the northeastern region at the two day NEC meeting held on June 16 - 17, chaired by chairman and Union Minister of Development of North Eastern Region BK Handique and attended by all the eight chief ministers from the region.

According to the press release issued NEC, 'the northeastern states, mainly Arunachal Pradesh, have the potentiality to generate 63,257MW hydro electricity. The biggest hydro-electric plant, Lower Subansiri, in Arunachal Pradesh with a capacity of 2,000 MW is scheduled to be completed between 2013-2015'. The press note also underscored that the first unit of gas-based Palatana power project in southern Tripura is scheduled to be completed in November 2011 and the second by March 2012. The state-owned Oil and Natural Gas Corporation (ONGC) is commissioning its first ever 726MW capacity commercial power project at a cost of Rs 9,000 crore at Palatana, 60 km south of Tripura capital Agartala, the release said.

The presser stated that 433 km of road, at an estimated cost of Rs 1,353 crore, in six states of the northeastern region would be upgraded with the Asian Development Bank (ADB) loan. The NEC, constituted in 1971, is a regional planning and execution agency for overall development of the northeastern states of Assam, Arunachal Pradesh, Meghalaya, Mizoram, Manipur, Nagaland, Sikkim and Tripura.

The S&P CNX Nifty touched high and low of 5,377.40 and 5,195.90, respectively.

The top gainers of the Nifty were Bharti Airtel up 2.40%, Axis Bank up 0.61%, Hero Honda up 0.48%, PNB up 0.40% and Hinustan Unilever up 0.12%.

On the flip side, RCOM down 8.35%, Reliance Infra down 6.16%, Reliance Capital down 5.06%, Cairn down 4.73% and Grasim down 4.73% were the major losers on the index.

European markets were trading in red. France's CAC 40 plunged 1.15%, Britain's FTSE 100 declined 0.65% and Germany's DAX up lost 1.04%.

Most of the Asian equity indices finished the day's trade in the negative terrain on Monday after European finance ministers delayed a decision to extend emergency help to prevent Greece from defaulting on its debts. Meanwhile, Hong Kong shares gave up their earlier gains and snapped the day's trade with a cut of about half a percent as property sector weighed the sentiments in the region, while Shanghai shares lost over 0.70 percent amid a fresh round of concerns over Chinese economic growth and possible new measures to cool housing prices.

Asian Indices	Last Trade	Change in Points	Change in %
Shanghai Composite	2,622.63	-20.19	-0.76
Hang Seng	21,599.51	-95.75	-0.44
Jakarta Composite	3,729.12	6.82	0.18
KLSE Composite	1,559.19	-4.24	-0.27
Nikkei 225	9,354.32	2.92	0.03
Straits Times	3,013.60	8.32	0.28
Seoul Composite	2,019.65	-12.28	-0.60
Taiwan Weighted	8,530.68	-105.42	-1.22

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