Proposed regulations on foreign funds coupled with worries over retrospective tax and the continuing slide in Chinese markets subdued investor sentiment in the Indian equity markets during the late-afternoon trade session on Tuesday.
The barometer S&P 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE) was trading flat -- down 33 points -- during the late-afternoon trade session.
The wider 50-scrip Nifty of the National Stock Exchange (NSE), too, was trading flat -- 9.65 points or 0.12 percent down at 8,351.35 points.
The S&P BSE Sensex which opened at 27,630.21 points, was trading at 27,528.25 points (at 2.30 p.m.), down 33.13 points or 0.12 percent from the previous day's close at 27,561.38 points.
The Sensex had so far touched a high of 27,676.65 points and a low of 27,416.39 points in the intra-day trade.
According to market analysts, investors were anxious to know if the government will accept the suggestions of the special investigative team (SIT) appointed by the Supreme Court on black money.
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The SIT has recommended that the participatory note, or P-Note, route of overseas funds investing in Indian stocks be stringently regulated.
The frantic sell-off in the Chinese bourses, coupled with the issue of retrospective tax on capital gains and the containment of the central bank's powers in terms of fixing key rates also subdued the Indian equity markets.
"Markets are still awaiting more clarity on SIT's recommendations and Justice A.P. Shah committee's report on minimum alternate tax (MAT)," Anand James, co-head, technical research desk, Geojit BNP Paribas, told IANS.
"Both the issues have potential to negatively impact Foreign Institutional Investors (FIIs) fund flow into India. The FIIs have been net buyers since July 13, 2015."
James observed that the volatility was also on account of the upcoming FOMC (Federal Open Market Committee) meet on July 29. The FOMC meet will give further clues as to when the rate hike might take place in the US.
With higher interest rates in the US, the FPIs (Foreign Portfolio Investors) are expected to be led away from emerging markets such as India.
Sector-wise, healthy buying was observed in banks, capital goods and consumer durables scrip. However, automobile, healthcare and metal stocks came under intense selling pressure.
The BSE banking index gained by 116.24 points, the capital goods index was higher by 96.73 points and the consumer durables index was up 29.26 points.
However, automobile index declined by 83.47 points, healthcare index lost 78.45 points and metal index was lower by 47.88 points.