Tax treaty review, rupee take toll on the markets

Banks and realty stocks among top losers

Markets extended losses in late noon deals, owing to selling pressure in banking and realty shares. The Sensex touched a low of 16,777 and finally ended down 324 points at 16,827. Nifty slipped 102 points at 5,086, touching its lowest levels since January 2012. Plans to review tax treaty with Mauritius dampened investor sentiment just as the rupee weakened further against the dollar.

Meanwhile, in Asia, markets slipped following a sharp overnight drop in crude oil hitting energy names, ahead of the closely-watched U.S. nonfarm payrolls report. Hang Seng slipped 0.7% to 21,086. Straits and Kospi markets were also down. Wall Street closed with mild losses on Thursday, one day ahead of the key U.S. jobs data for April.

All the sectoral indices, barring healthcare, slipped into red. BSE capital goods index tumbled 3.74% to 8,909. Bankex, metal and realty indices shed 2-3% each. Meanwhile, the healthcare index remained flat at 6,803.

Banks witnessed selling pressure after Macquarie in a report said, that the RBI directives to meet Basel III regulations could lead to an equity dilution in banks of roughly $30-35 billion over the next five years.

Further, Minister of State for Finance S.S. Palanimanickam told lawmakers on Friday that India is considering a review of the Double Taxation Avoidance Treaty with Mauritius to raise revenues.

Heavyweights were the key draggers today. ICICI Bank, Larsen & Toubro and Reliance together accounted for a 101 points fall on the BSE benchmark.

RIL slipped 1.7% at Rs 7265. In less than a year of signing the transformational deal between Reliance Industries (RIL) and British Petroleum (BP), analysts say the value of the deep-water blocks held by RIL and BP (in India) is down by over a half.

BHEL - the biggest loser among Sensex stocks - slipped 5% to Rs 214, followed closely by Hero MotoCorp, Bajaj Auto and SBI. Metal shares declined with Hindalco and Tata Steel dropping 2-3% each.

Meanwhile, Cipla added 2.5% to Rs 325 after the company cut the price of its generic version of Bayer's cancer drug Nexavar by 75% to Rs 6,840 for a monthly dose. Meanwhile, Natco Pharma shed 5.6% to Rs 394 following the news. Natco charges Rs 8,880 for the same drug.

IT index was down 1% at 6,802. The rupee traded at 53.86 as against Thursday's close of 53.41/42 against the dollar.

"Recently, the rupee hit its four-month low and recovered. It has been quite volatile for the whole FY12. In last one year, the rupee has depreciated almost 14 per cent. The movement of the rupee has been mainly on parameters of fundamental issues like the fragile global growth and weak Indian macro-economic factors, which are likely to keep it under pressure. Accordingly, we expect the rupee to depreciate to 54 or also 55 - 56 levels by October 2012," said A K Prabhakar, Senior Vice President Equity Research, Anand Rathi.

Among individual stocks, Pantaloons Retail tumbled 13% to Rs 161. Kishore Biyani's promoted Pantaloon Retail said on Thursday that its board had passed a resolution to change its name to Future Retail India after the country's largest retailer sold majority stake in its apparel business to Aditya Birla Nuvo on April 30.

Bank of Baroda rose slumped 6% in late trades to Rs 687, in spite of reporting a 17% year-on-year jump in its March quarter profits to Rs 1518 crore supported by higher interest income and lower tax provisions.

BSE market breadth was negative. Out of 2,913 shares traded, 2,067 shares delcined while 746 shares advanced.