A bout of volatility was witnessed as the Nifty 50 index once again slipped into the red after reversing intraday losses in early afternoon trade. At 12:20 IST, the Nifty was down 12.90 points or 0.16% at 7,874.90. The losses for the barometer index, the S&P BSE Sensex, were higher than the losses for the Nifty index in percentage terms. The Sensex was currently off 74.19 points or 0.29% at 25,698.34. The Sesnex and the Nifty staged a rebound 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 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.
Market participants are concerned about possible slowdown in future equity inflows into India in the aftermath of amendments to the bilateral India-Mauritius tax treaty. Mauritius is the top source of foreign funds into India.
The Nifty rose 5.30 points or 0.06% at the day's high of 7,893.10 in early afternoon trade. The index 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 Sensex declined 10.04 points or 0.03% at the day's high of 25,762.49 in early afternoon trade. The barometer index 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.
In overseas stock markets, Asian stocks witnessed a mixed trend. US stocks registered broad based gains yesterday, 10 May 2016, as oil prices rallied.
Closer home, the market breadth indicating the overall health of the market was negative. On BSE, 1,096 shares fell and 1,065 shares rose. A total of 121 shares were unchanged. The BSE Mid-Cap index was currently up 0.47%. The BSE Small-Cap index was currently up 0.31%. Both these indices outperformed the Sensex.
Telecom stocks edged higher in volatile trade on reports that the Supreme Court today, 11 May 2016, struck down the telecom regulator's directive imposing penalty for call drops on telecom operators. Bharti Airtel (up 0.12%), Tata Teleservices (Maharashtra) (up 1.83%) Reliance Communications (up 1.35%) and Idea Cellular (up 1.42%) gained. The Apex court called the directive unconstitutional and arbitrary. The Supreme Court ruled that the Parliament can make and enact a call drop compensation rule, adding that the authority of the Telecom Regulatory Authority of India (TRAI) remains intact. It, however, questioned the regulator's process of arriving at the call drop decision, report added.
TRAI last October had imposed a penalty of Rs 1 per call dropped with a maximum penalty of Rs 3 per day on telecom operators for each call dropped on account of an error on the part of the telecom operator.
Shares of Bharti Infratel declined 1.4%. Bharti Infratel is a telecom tower arm of Bharti Airtel.
Cement stocks also gained. Shree Cement (up 1.17%), Ambuja Cements (up 0.23%), and UltraTech Cement (up 1.38%), gained. ACC declined 0.21%.
Grasim Industries advanced 1.47%. Grasim has exposure to the cement sector through its holding in UltraTech Cement.
Zee Entertainment Enterprises (Zee) jumped 6.54% after the company announced good Q4 results. 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.
Steel Strips Wheels rose 0.93% after the company said it has bagged an export order for European Winter wheels market. The announcement was made during trading hours today, 11 May 2016. The company said that the order will cover supplies of about 9,600 wheels with an order value of about 122,000 euros. The company is expecting this order to repeat in near future. The wheels will be supplied from the company's Chennai plant in India with the first supplies planned by end of this month.
Huhtamaki PPL was locked in 20% upper circuit at Rs 277.40 after consolidated net profit rose 67.4% to Rs 34.28 crore on 19.3% growth in net sales to Rs 520.01 crore in Q1 March 2016 over Q1 March 2015. The announcement was made after market hours yesterday, 10 May 2016.
SRF rose 3.26% after consolidated net profit rose 80.06% to Rs 108.79 crore on 2.60% rise in net sales to Rs 1093.07 crore in Q4 March 2016 over Q4 March 2015. The result was announced after market hours yesterday, 10 May 2016. SRF's earnings before interest, taxes, depreciation and amortization (EBITDA) rose 43% to Rs 234 crore in Q4 March 2016 over Q4 March 2015. The board approved a capital expenditure (capex) proposal for setting up a BOPP film line and a metallizer in the existing domestic tariff area (DTA) campus at Indore at a total investment of around Rs 269 crore. With a maiden domestic entry into the space of BOPP films, SRF aims to emerge as a one-stop shop for its customers mainly in India. The proposed project will be the second BOPP unit for SRF; the first one was set up at Durban in South Africa in 2012. The project is scheduled to be commissioned in the last quarter of 2017-2018.
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