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Sensex, NIfty jump on reports of rollback of tax surcharge on FPIs



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The benchmark indices rallied on Thursday, with the Sensex posting its biggest single-day gain since January 31 and the Nifty zooming past the 11,000-mark on reports that the government was planning a rollback of the higher tax surcharge on foreign portfolio investors (FPIs).

The Sensex rose 637 points, or 1.74 per cent, to end at 37,327, while the Nifty50 index gained 177 points, or 1.63 per cent, to settle at 11,032.

Finance Minister Nirmala Sitharaman faces pressure to roll back controversial tax measures introduced last month as foreign investors pull funds out of Indian markets and automakers and other manufacturers report falling sales and job cuts. She has commenced a series of meetings with industry participants to address their concerns and decide on steps needed to bolster the economy.

Besides optimism over some positive announcement from the government, a sharp slide in the oil prices helped ease some concerns on the macroeconomic front. Brent crude prices have declined 12 per cent to $57 a barrel so far this month. Also, China’s move to fix the yuan rate at a stronger-than-expected level helped assuage fears of a currency war and further flare-up in trade tensions. Most global markets, too, rallied on Thursday.

Domestic stocks have seen a considerable correction since the Union Budget presentation on July 5. Budget proposals such as an increase in tax surcharge on FPIs, introduction of 20 per cent tax on share buybacks, and the move to increase free float in all listed companies by 10 per cent to 65 per cent have disappointed investors. Also, lack of measures to shore up growth has sparked concerns of a prolonged downturn in the economy.

The benchmark indices have slid more than 6 per cent since the Budget, while the broader markets have come off even more. Some analysts believe the latest correction is a buying opportunity.

“We are in buy territory. While a V-shaped recovery in share prices depends on policy action, our indicators suggest that investors with a bit of patience will likely be rewarded well in the next 12 months,” wrote Ridham Desai, managing director, Morgan Stanley India, in a note.

“Indian equities look attractive in a relative context amid subdued oil prices, global trade tensions and better relative valuations in what is a low-return world,” said Desai. “Policy action is still needed to protect India’s relative performance, which has sunk since the Union Budget.”

What has hit the sentiment the most is the higher tax surcharge on overseas investors, who have pulled out nearly Rs 22,000 crore from domestic equities since the Budget. Though the surcharge was aimed at the super-rich, FPIs with non-corporate structures or trusts have been caught in the crosshairs.

“Quite a few FPIs are international mutual funds structured as trusts. The increased surcharge has affected them since funds are floated based on a stable and predictable tax regime,” said U R Bhat, director, Dalton Capital Advisors.

“If you did not have the prospect of a higher tax, FPIs will be more inclined to invest in India,” said Andrew Holland, CEO of Avendus Capital Public Markets Alternate Strategies.

Barring three, all Sensex stocks ended with gains, with HCL Technologies rallying the most at 6.4 per cent, followed by Tata Motors, which rose 5.6 per cent. Mahindra & Mahindra and Bajaj Auto rallied around 4 per cent each. Shares of Reliance Industries jumped nearly 4 per cent and made a 136-point contribution to Sensex gains.

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Sitharaman’s sops for NBFCs may perk up lending, ease liquidity stress



Illustration by Binay Sinha

To further ease the liquidity stress in the non-banking sector and nudge them to revive their lending activities, Finance Minister (FM) Nirmala Sitharaman on Friday announced a slew of measures for non-banking financial companies (NBFCs) and housing finance companies (HFCs). The government hopes this will result in more credit support for purchase of houses, vehicles, and consumption goods.

The government has provided additional support of Rs 20,000 crore to the stressed housing finance companies from National Housing Bank (NHB). With this, the additional liquidity support for the HFCs from NHB has gone up to Rs 30,000 crore.

In the Union Budget last month, the FM had encouraged public sector banks (PSBs) to buy high-quality pooled assets of NBFCs up to Rs 1 trillion for which the government would provide a one-time six-month partial credit guarantee for the first loss of up to 10 per cent.

The Reserve Bank of India (RBI) had also chipped in by tweaking banks’ bond-holding norms. This will allow banks to borrow an additional Rs 1.34 trillion exclusively for buying such pooled assets and giving loans to NBFCs. The FM on Friday said this partial credit guarantee scheme will be monitored at the highest level in each bank. Through this, it is expected that many of the assets will get quickly pooled and NBFCs will receive the necessary liquidity. “NHB has already settled some of the issues. NBFCs are receiving money from the banks and are moving towards funding,” said Sitharaman.

Sanjaya Gupta, managing director, PNB Housing Finance, said “This will support growth and ease the liquidity crunch. HFCs will now get an additional Rs 20,000 crore from NHB. The initiatives have potential to kick start the real estate sector.”

The government has also permitted NBFCs to use Aadhaar-authenticated bank KYC to avoid repeating the same process when a customer approaches it for credit. This has been a long-standing demand. The necessary changes in the Aadhaar regulations and Prevention of Money Laundering Act rules will be made, the FM said.

“This will streamline the process and also reduce frauds,” said Raman Aggarwal, chairman, Finance Industry Development Council.

The government has also asked PSBs and NBFCs to fast-track their collaboration to provide credit to micro, small and medium enterprises, small traders, self-help groups, and micro finance industry client borrowers.

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PACL Case: Sebi panel invites expression of interest for 28,974 properties




A committee headed by Justice R M Lodha has invited expression of interest (EoI) from prospective buyers for a total of 28,974 properties belonging to PACL Group.

Market regulator Sebi had set up a committee headed by former Chief Justice of India R M Lodha following a Supreme Court order to refund money to investors in the matter of PACL Group.

As per the notice issued by Sebi, the committee has divided the total 28,974 properties belonging to PACL group in four zones — east, west, north and south — with maximum properties being located in the southern zone.

Regarding PACL properties, the apex court’s order dated July 30 observed “we also leave it open to the committee to receive any further offers and to explore them after duly publishing a further notice on the website,” the notice said.

In pursuance of apex court’s order, the committee “invites Expression of Interest from prospective buyers clearly indicating therein, list of properties in each zone, its circle rate, the offer amount and other relevant details,” the Friday notice said.

“The proposal should be for properties in each zone aggregating in value not less than Rs 1,000 crore,” the notice added.

The notice further said that the last date of receipt of proposals is September 9.

PACL, also known as Pearl Group, had raised Rs 60,000 crore from public in the name of agriculture and real estate businesses and was found by Sebi to have collected these funds through illegal collective investment schemes over 18 years.

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Improved market access for domestic retail investors with Aadhaar-based kYC



Markets, Investors, Indices, Stocks

The government will allow Aadhaar-based KYC for domestic retail investors, and necessary amendments to the rules under the Prevention of Money Laundering Act will be issued.

Announcing a slew of measures to boost the economy, the government said the Depository Receipt Scheme 2014 is expected to be operationalised soon by Sebi. “This will give Indian companies increased access to foreign funds through American Depository Receipt (ADR)/ Global Depository Receipt (GDR),” she said.

In order to improve market access for the domestic retail investors, Aadhaar-based KYC will be permitted for opening of demat account and making investment in mutual funds. In this regard, necessary notification for amendments in PMLA rules would be issued.

Besides, steps would be taken with regard to offshore rupee market.

“To bring offshore rupee market to domestic stock exchanges and permit trading of USD-INR derivatives in GIFT IFSC, Ministry of Finance is working with RBI to introduce this measure shortly,” the government said.

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