Commodity Trade Mantra

Sensex, Nifty nose dive: Equity Markets crash on Mauritius tax treaty review.

Equity Trading

Equity Markets crash

BSE Sensex dipped below the 16900 mark today at mid-session on heavy selling amid the weakening rupee and overall un-inspiring corporate earnings announced over the past couple of weeks. The 50-scrip National Stock Exchange index, Nifty, was down at 5,088. Equity Markets are seen trading at a three-month low.

The Equity Markets crash can be attributed to the news that the government may be looking to review India’s tax treaty with Mauritius to raise revenues. The Minister of State for Finance, S.S. Palanimanickam, said India would review its tax treaty with Mauritius, a Reuters report said. The bulk of India’s foreign investors are believed to be based in Mauritius.

The market decline was led by capital goods, realty and banking stocks. Baring the healthcare index, all the sector indices were seen in the red. Brokers said investor sentiment has turned weak on disappointing corporate earnings and the weakening Rupee which has fallen to over 4-month low against the US dollar, as well as the trend in global markets was also weak. European markets, which also opened lower across the board added more gloom, led by banks and oil stocks.

INR Update:

The Indian rupee has tumbled back at commencement on Friday, May 04, 2012, to its lowest level since end December 2011 when the domestic currency crossed the Rs 54.00 per dollar mark after which the RBI took steps to arrest the free-fall of rupee to a record low. The Indian Rupee, already reeling under the impact of a widening capital account deficit, a slowing economy, and fears about policy reforms, is also being undone by uncertainty about taxation of foreign investors. The INR May Futures touched a high of 53.88 early today & then dropped to a low of 54.1750 till now. The INR can be expected to re-bound from these lows as it faces a stiff resistance around 54.28 level. Focus for the day will be on data, to be announced later on today as well as elections in France and Greece on Sunday.

 More Downgrade News:

Moody’s has placed the insurance financial strength rating of Life Insurance Corporation of India – LIC’s, BAA2 / stable, (current status) under review for possible downgrade. This review reflects Moody’s revised assessment of the linkage between the credit profiles of sovereigns and financial institutions globally, which is discussed in the rating implementation guidance How Sovereign Credit Quality May Affect Other Ratings published on 13 February, 2012.

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