FII tax worries keep Indian markets on tenterhooks

The key benchmark index Sensex once again slipped below 17,000 to 16920.61 before making a recovery and ending at 17,059. Market experts say that the volatility in the market is triggered by weak global cues, expiry of March derivatives contracts and short covering in the later trading session on the domestic bourses.
 
The index had closed on Wednesday at 17,121.62. However, it retreated around 63 points on Thursday. During the day, the market breadth - which indicates the overall health of the market - remained strong. On BSE, 1,539 shares gained and 1,270 shares declined. A total of 105 shares were unchanged.
 
Alex Mathews, head of research, Geojit BNP Paribas Financial Services, says, "F&O expiry and short covering in the banking sector kept the markets highly volatile. The outlook of the market is looking bearish due to confusion over General Anti-Avoidance Rules (GAAR)."
 
However, Amar Ambani, head of research, IIFL says, "Apart from the GAAR overhang, the sentiment was also hurt by weakness in the global markets. Asian equity benchmarks closed lower today amid growing concerns about economic growth in China. Economic reports out of the US this week have also not been all that great. At the same time, economists and market experts warn about continued troubles for the debt-strapped euro area economies."
 
With lots of uncertainty over the GAAR regulations for FII investments, market players are not taking any chances for the moment. Market participants are waiting for more clarity on the contentious matter from the Government. The new GAAR regime comes into effect from April 1. According to the market watchdog, the Securities and Exchange Board of India, FIIs remained net sellers as their net outflow stood at 1761.30 crore on Thursday.
 
Meanwhile, Eurozone economic confidence dropped marginally in March after improving in January and February, survey data from the European Commission revealed on Thursday.  The economic sentiment index fell to 94.4 from 94.5 a month ago. The reading was below the consensus forecast of 94.5.
 
On the sectoral front, the BSE Capital Goods index declined 1.61 per cent to 9,834.68 followed by IT (down 1.17 per cent to 5,951.18) and FMCG index (down 0.65 per cent to 4,443.47).
 
"Profit booking dragged the FMCG and Capital goods stocks towards south. However, IT shares declined on reports that the US government has decided to hike the H-1B visa fee from next fiscal," says Mathews.
 
From the 30-share Sensex pack, the share prices of Larsen and Toubro, Infosys and TCS declined 2.09 per cent, 1.78 per cent and 1.71 per cent to Rs 1280.55, Rs 2,791, Rs 1143.25, respectively, and remained the biggest losers. On the gainers side, the stock price of Jindal Steel, Tata Power and Hero MotoCorp jumped 4.22 per cent, 2.99 per cent and 1.55 per cent to Rs 548.80, Rs 98.20 and Rs 2,024, respectively.