Worries over delay in land, tax reforms spook shares

MUMBAI (Reuters) - The BSE Sensex and Nifty fell more than 2 percent on Tuesday, giving up most of their gains made in the previous two sessions, as stocks across the board declined on worries that key land acquisition and tax reforms would be delayed further.

Forty-eight stocks of the 50 that make up the broader Nifty fell on worries the government has agreed to review the Land Acquisition Bill and the Good and Services Tax Amendment, unnerving foreign investors about likely delays.

India on Tuesday said it was ready to refer the land bill to a government panel for review, while the tax bill had already been sent to another panel, which reduces the likelihood of these reforms being passed in the current session of the parliament.

 

Also, the rupee trading below the key 64 per U.S. dollar level is raising worries that foreign portfolio outflows may create a vicious cycle between rupee and domestic shares, fund managers said.

Overseas investors have sold nearly $2 billion worth of cash shares in the last 15 sessions, excluding Japan's Daiichi Sankyo's <4568.T> block sale of Sun Pharmaceutical Industries shares.

"The delay in land reforms would be a setback amid the current mood," said U.R. Bhat, managing director at Dalton Capital in Mumbai.

Outflows from debt and equities due to changing economic equations are also a big worry, he added.

The Sensex fell 2.3 percent while the Nifty ended 2.4 percent lower finding resistance from their technically important 200-day moving average.

Caution also prevailed ahead of factory output growth and retail inflation data due later in the day. Industrial production (IIP) rose 2.8 percent annually in March, slowing from February's three-month high of 5.0 percent, a Reuters poll of economists found.

Fresh worries on retrospective taxation, upcoming monsoon and slower-than-expected recovery in earnings continued to weigh on sentiment as well.

India VIX <.NIFVIX>, a gauge of expected volatility in Indian shares, jumped 10.3 percent.

ICICI Bank fell 4.7 percent, while Housing Development Finance Corp lost 2.8 percent.

Reliance Industries ended down 3 percent and Infosys lost 2.3 percent.

Selling was seen across the board. The NSE Mid-Cap index fell 1.6 percent and the NSE Small Cap index <.CNXSMCP> lost 2.5 percent.

However, investment banks are again getting enthused about local stocks after a more than 12 percent fall from record highs hit in March.($1 = 63.9200 rupees)

(Reporting by Abhishek Vishnoi; Editing by Subhranshu Sahu and Anand Basu)