Nifty at 7month low, Sensex falls 234 pts on Modi’s tax talks
MONDAY BLUES Investors go into selloff mode on fears of more taxes for financial market participants; FII outflows also hit sentiment
MUMBAI: Equity markets fell 1% on Monday, with the NSE Nifty hitting a seven-month low, on Prime Minister Narendra Modi’s remarks during the weekend that people earning from financial markets must make fair contribution to the country’s overall tax collection.
The statement at a function in Mumbai led to worries among investors that the government could likely review tax levies on securities transactions in the upcoming Budget, although finance minister Arun Jaitley clarified on Sunday that the Centre had no plans to impose longterm capital gains tax.
The Sensex closed down 234 points, or 0.9%, to 25,807.10. The Nifty fell 78 points, or 1%, to 7,908.25.
“For various reasons, the contribution of tax from those who make money from the markets has been low…low or zero tax rate is given to certain types of financial income. We should consider methods for increasing it in a fair, efficient and transparent way,” Modi had said.
“The reference to low level of taxes paid by financial market participants unnerved markets. The clarification by the finance minister also did not help,” said Gaurav Dua, research head at Sharekhan.
Mumbai’s broking community was abuzz on Monday that the likely tax levies could be aimed at plugging loopholes in transactions like bonus share issues.
According to preliminary data from the National Stock Exchange (NSE), foreign institutional investors (FIIs) sold shares worth ₹1,095 crore on Monday. FII fund outflows have increased since the government announced its demonetisation drive on November 8, on fears that the exercise could hurt India’s economic growth. The outflows have also been attributed to US Federal Reserve Janet Yellen’s statements hinting at faster rate hikes next year, after raising interest rates by 0.25% earlier this month.
FIIs have pulled out ₹3,744 crore from the equity markets so far in December. In November, foreign funds had withdrawn ₹18,244 crore.
On Monday, 25 out of the 30 Sensex stocks ended in the red. Pharma stocks were among the major losers, with Cipla falling 5%, Lupin down 2.8% and Sun Pharma closing 2% lower.
Realty stocks also witnessed some sell-off, with DLF declining 7%, HDIL down 6.5% and Oberoi Realty falling 3.2%. During his monthly radio programme Maan Ki Baat on Sunday, Modi had said that a crackdown on benami properties would be the next step against corruption.
“You are possibly aware of a law about benami property in our country, which came into being in 1988… We have retrieved it and turned it into an incisive law against benami property. In the coming days, this law will also become operational,” the Prime Minister had said.
According to experts, the crackdown on benami properties, along with other recent measures, including demonetisation and RERA (Real estate Regulation and Development Act), would clean up the sector.
“The demonetisation move caused considerable turmoil; however, along with the Benami Transactions Act, it promises to bring greater transparency in the real estate sector,” said Anuj Puri, chairman, JLL India.
Meanwhile, continuing its rally for the second day, the rupee surged by 8 paise to end at 67.74 against the dollar on persistent selling of the American currency by banks and exporters, amid a weak dollar overseas.