The Indian benchmarks have plunged post the news of India and Mauritius agreeing to revamp the DTAA, though still there is no formal disclosure whether there will be any serious rethink on the issue or not but all the stocks having investment linked to Mauritius are showing sharp position unwinding. The benchmarks have lost their nearest support level and are now trading down by about 2 percent. All the sectoral indices have suffered sharp and sudden cut with technology and infra stocks suffering the most. The plunge in the ADA group companies after the decision of excluding the two prominent stocks of the group, RCom and Reliance Infra from SENSEX too has pinched hard to the markets. Market breadth has turned extremely weak on higher volume, while the broader indices capitulated the most with over 3 percent of cut.
India will restart negotiations with Mauritius on revamping the three-decade-old bilateral double tax avoidance agreement (DTAA). Following a request from Mauritius for renegotiations of DTAA India decided last week to proceed in the matter. DTAA has reportedly been used to launder black money as investments in the country.
The India-Mauritius tax treaty provides that capital gains arising in India from the sale of securities can only be taxed in Mauritius, and since the island nation does not tax capital gains, it leads to zero taxation.
More than 40% of total foreign direct investments (FDIs) to India originate from Mauritius. Authorities here suspect most of these investments are nothing but treaty shopping to avoid paying tax. India is estimated to lose over $600 million a year in revenues on account of the DTAA with Mauritius. Earlier talks on the treaty through a joint working group were held in 2008 but had failed following Mauritian government's insistence to continue with the existing agreement. India has been insisting on taxing all gains made by a Mauritian company here.
The BSE Sensex is currently trading at 17,552.13, down by 318.40 points or 1.78%. The index has touched a high and low of 17,925.17 and 17,314.38 respectively. There was just 1 stock advancing against 29 declines on the index.
The broader indices are under deep selling pressure; the BSE Mid cap and Small cap indices plunged by 3.04% and 3.28% respectively.
None of the sectoral index was in green, while the top losers were IT down by 2.74%, TECk down by 2.72%, realty down by 2.385, Power down by 2.21% and Oil & Gas down by 1.96%.
The lone gainer on the Sensex was Hero Honda up by 0.45%.
On the flip side, Reliance Infra down by 6.60%, RCom down by 6.52%, JP Associates down by 3%, Wipro down by 2.90% and TCS down by 2.88% were the top losers.
Sensex, the premier index at the Bombay Stock Exchange will see reshuffling its portfolio with Anil Dhirubhai Ambani Group companies Reliance Infrastructure and Reliance Communications being no longer part of the list. They will be replaced by Coal India and Sun Pharmaceuticals. The decision was taken by the Index committee of the BSE in its meeting held on June 17, 2011.
The changes will be effective from August 8, 2011. However, the two ADA group companies along with Reliance Power and Reliance Capital continue to be part of the 50 stocks that make NIFTY - the premier index of the National Stock Exchange. Coal India is the most valued PSU and the second most valued company in India with a market capitalization of Rs 2.5 lakh crore while Sun Pharma, with a market cap of nearly Rs 50,000 crore is the most valued pharma company now.
The S&P CNX Nifty is currently trading at 5,273.40, down by 93.00 points or 1.73%. The index has touched a high and low of 5,377.40 and 5,195.90 respectively. There were just 2 stocks advancing against 48 declines on the index.
The two gainers of the Nifty were hero Honda up by 0.62% and Bharti Airtel up by 0.20%.
On the other hand, RCom down by 6.93%, Reliance Infra down by 6.36%, RPower down by 3.99%, Grasim down by 3.92% and HCL Technology was down by 3.42%.
The Asian markets continue to trade mixed, Shanghai Composite was down by 0.94%, Hang Seng declined by 0.06%, KLSE Composite was lower by 0.11%, Seoul Composite lost 0.46% and Taiwan Weighted plunged by 1.11%.
On the other hand, Jakarta Composite gained 0.42%, Nikkei 225 was up by 0.19% and Straits Times was higher by 0.65%.
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