Concerns that future equity inflows into India would be hit in the aftermath of amendments to the bilateral India-Mauritius tax treaty weighed on the domestic bourses. The barometer index, the S&P BSE Sensex, shed 171.74 points or 0.67% at 25,601.06, as per the provisional closing data. The losses for the Nifty 50 index were lower than the losses for the Sensex in percentage terms. The Nifty declined 38.95 points or 0.49% at 7,848.85, as per the provisional closing data. Nonetheless, both these key benchmark indices recovered from an initial steep slide as market took solace in the so-called grandfathering of investments made in India from Mauritius before 1 April 2017 in the amended bilateral India-Mauritius tax treaty. As per the amendments to the bilateral India-Mauritius tax announced by India's finance ministry after trading hours yesterday, 10 May 2016, with effect from 1 April 2017 capital gains tax will be levied on sale of shares in India from a resident of Mauritius.
There will be a benefit of 50% reduction in the capital gains tax rate during the transition period from 1 April 2017 to 31 March 2019 subject to the Limitation of Benefits Article, whereby a resident of Mauritius (including a shell/conduit company) will not be entitled to the benefit of 50% reduction in tax rate if it fails the main purpose test and bonafide business test. A resident is deemed to be a shell/ conduit company, if its total expenditure on operations in Mauritius is less than Rs 27 lakh (Mauritian Rupees 1,500,000) in the immediately preceding 12 months. Taxation in India at full domestic tax rate will take place from financial year 2019-20 onwards. Mauritius is the top source of foreign funds into India.
Following the amendments to the bilateral India-Mauritius tax treaty, India and Singapore will need to renegotiate their own double tax-exemption treaty, as rules say that any changes to the capital gains exemption clause in the treaty with Mauritius would also lead to changes in the agreement with Singapore. Singapore is another major source of foreign funds into India.
The Sensex and the Nifty snapped two-day winning streak.
The Sensex lost 363.29 points or 1.4% at the day's low of 25,409.24 at the onset of the trading session, its lowest level since 9 May 2016. The barometer index declined 10.04 points or 0.03% at the day's high of 25,762.49 in early afternoon trade. The Nifty lost 106.90 points or 1.35% at the day's low of 7,780.90 at the onset of the trading session, its lowest level since 9 May 2016. The index rose 5.30 points or 0.06% at the day's high of 7,893.10 in early afternoon trade.
In overseas stock markets, European shares slipped as some weak earnings pushed the market lower after two previous days of gains. Earlier during the global day, Asian stocks ended on a mixed trend. US stocks registered broad based gains yesterday, 10 May 2016, as oil prices rallied.
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Closer home, the market breadth indicating the overall health of the market was negative. On BSE, 1,455 shares fell and 1,114 shares rose. A total of 150 shares were unchanged. The BSE Mid-Cap index provisionally rose 0.17%, outperforming the Sensex. The BSE Small-Cap index provisionally fell 0.03%. The decline in this index was lower than the Sensex's decline in percentage terms.
Total turnover on BSE amounted to Rs 2566 crore, higher than turnover of Rs 2349.59 crore registered during the previous trading session.
Kotak Mahindra Bank rose after the bank announced strong Q4 results. The stock rose 1.01%. The bank's net profit rose 31.99% to Rs 695.78 crore on 52.26% rise in total income to Rs 4947.32 crore in Q4 March 2016 over Q4 March 2015. The results are not comparable due to merger of ING Vysya Bank with Kotak Mahindra Bank, which took effect from 1 April 2015.
The bank's gross non-performing assets (NPAs) stood at Rs 2838.11 crore as on 31 March 2016 as against Rs 2690.34 crore as on 31 December 2015 and Rs 1237.23 crore as on 31 March 2015. The ratio of gross NPA to gross advances stood at 2.36% as on 31 March 2016 as against 2.3% as on 31 December 2015 and 1.85% as on 31 March 2015. The ratio of net NPA to net advances stood at 1.06% as on 31 March 2016 as against 0.96% as on 31 December 2015 and 0.92% as on 31 March 2015.
The bank's provisions and contingencies spurted 199.38% to Rs 200.41 crore in Q4 March 2016 over Q4 March 2015.
On a consolidated basis, Kotak Mahindra Bank's net profit rose 15.63% to Rs 1055.23 crore on 28.16% increase in total income to Rs 7910.41 crore in Q4 March 2016 over Q4 March 2015.
Hindalco Industries rose after its US subsidiary Novelis Inc reported strong Q4 results. The stock rose 1.84%. Novelis' net profit excluding tax-effected special items rose 35% to $50 million on 14% fall in revenue to $2.4 billion in Q4 March 2016 over Q4 March 2015. The result was announced after trading hours in India yesterday, 10 May 2016.
Asian Paints rose after announcing good Q4 results. The stock rose 1.55%. The company's consolidated net profit rose 19.9% to Rs 408.80 crore on 12.3% rise in income from operations to Rs 3971.30 crore in Q4 March 2016 over Q4 March 2015. The result was announced at the fag end of the session today, 11 May 2016.
Index heavyweight and cigarette maker ITC declined 1.78% to Rs 317.55. The stock hit high of Rs 322.80 and low of Rs 316.10 in intraday trade.
Index heavyweight and housing major HDFC lost 1.35% to Rs 1,202. The stock hit high of Rs 1,220.55 and low of Rs 1,200.05 in intraday trade.
Zee Entertainment Enterprises (Zee) jumped after the company announced good Q4 results. The stock surged 6.91%. The company's consolidated net profit rose 12.93% to Rs 260.61 crore on 12.39% growth in total income to Rs 1577.37 crore in Q4 March 2016 over Q4 March 2015. Advertising revenue rose 29.1% to Rs 864.50 crore in Q4 March 2016 over Q4 March 2015. Subscription revenue rose 16.4% to Rs 594.40 crore in Q4 March 2016 over Q4 March 2015. Earnings before interest, taxation, depreciation and amortization (EBITDA) rose 52.8% to Rs 413.60 crore in Q4 March 2016 over Q4 March 2015. The result was announced after market hours yesterday, 10 May 2016.
Zee's board of directors at its meeting held yesterday, 10 May 2016, took on record the conclusion of acquisition of 49% equity stake in Fly By Wire International (FBW). It may be recalled that Zee had in March this year announced a proposal to acquire 100% equity stake in FBW which is engaged in aircraft charter services under a NSOP license from Director General of Civil Aviation (DGCA). At that time, Zee said that it initially proposes to acquire 49% equity stake in FBW and the balance 51% equity stake will be acquired within 5 days of receipt of approval from Ministry of Civil Aviation. The process is expected to be completed by mid-July 2016, Zee said at that time.
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