Sensex dips 366 pts as GAAR fears linger

One of the reasons for the fall was RBI Deputy Governor Subir Gokarn’s comment in Hyderabad that there is little room for reduction in interest rates in view of inflationary pressures. Bank stocks,including State bank of India,HDFC Bank and ICICI Bank fell between 2-3.3 per cent. “Comments of Gokarn that the central bank now has relatively little room to cut interest rates negated the sentiments,” said Shanu Goel,senior research analyst,Bonanza Portfolio.

Though GAAR has been deferred by a year,foreign institutional investors (FIIs) would not be flocking to Indian markets just yet as they would wait for more clarity on provisions. Besides,they will move their operations from Mauritius to Singapore and others,adding to their costs while disturbing operational smoothness,analysts said. What has added to the market uncertainty is the government’s plan to move against Vodafone with the tax demand.

Despite the government’s move on GAAR,foreign investors sold a net of Rs 1,030 crore in Indian stocks on Monday and Tuesday,according to provisional data from the NSE. “The changes were still vague… the uncertainty would continue at least until May 31,when a government committee is expected to provide guidelines,” said a dealer. “IT stocks also declined sharply after Cognizant lowered its revenue guidance for 2012,” said Alex K Mathews,head technical and derivatives research,Geojit BNP Paribas Financial.

Rupee fall continues,RBI intervenes again

The rupee fell 21 paise at 53.12 against the dollar on Tuesday on worries foreign investors would not be swayed by the government’s move to address their concerns over taxation,sparking a tumble in domestic stocks and fears of continued outflows. The rupee closed lower as relief to foreign funds on strenuous GAAR provisions seemed short-lived.

The rupee fall would have been steeper but for the RBI’s intervention. After touching a high of 52.68 in early trade,the rupee slumped to a low of 53.31 before concluding at 53.12,down 0.40 per cent from previous close. The RBI stepped in when the rupee weakened to 53.30 against dollar,continuing a series of interventions since last week.

ENS