Equity benchmarks of Bombay Stock Exchange and National Stock Exchange continued to drop points for the second consecutive session on Wednesday. Traders accumulated profits through selective sell-off taking advantage of the market’s worry over much rumoured revival of Long-Term Capital Gains (LTCG) tax in Budget on Thursday.
The decline in stocks was across the global markets from America’s Wall Street to Asia, including Dalal Street. Analysts say shares are losing charm in Wall Street on account of surge in long-term bond yields to four-year high.
Veteran brokers in Dalal Street discount fears over the possible imposition of LTCG tax saying it would not impact the current liquidity driven bull rally since it is intermittently disrupted by profit booking and unwinding of risky positions. The LTCG Tax is applicable under the rules to long-term investment of 12 or more months.
Market participants are more prone to frequent cyclical unwinding of positions in their bid for better returns. Technical considerations such as volatility and stretched valuations no more dictate investment in equities as participants pick their shares across all sectors with an eye on faster and better returns.
In a related development, United States based Morgan Stanley is believed to have shifted its main P-notes issuing activity from Singapore to France in view of tough new treaty between India and Mauritius which aims at tightening tax norms for offshore investors. P-Notes obviates several formalities and gives ready access to equity business without revealing the identity of investors.
Morgan Stanley, according to market sources, is the largest facilitator of P-notes investment with a share of 14.3 per cent. Securities and Exchange Board of India’s records also show another US financial service JP Morgan as having 11.2 per cent share in issuing P-notes. Morgan Stanley will now use France as a base to issue P-notes, say sources. In recent months, flow of offshore funds has suffered on account of stricter General Anti-Avoidance Rules that essentially govern investment in share markets from Singapore and Mauritius.
The Sensex, which fell below 36,000, closed at 35,965.02 (-68.71) points, down 0.19 per cent. Nifty declined 0.20 per cent to end at 11,027.70 (-21.95) points. Bank shares survived profit booking on Thursday as Nifty Bank closed at 27,379.45 (+110.40) points, up 0.40 per cent.
In Sensex, 14 stocks were up and 17 down. For Nifty, it was 21:28:1. Gainers in BSE benchmark included Kotak M Bank (1.88 per cent), RIL (1.34 per cent), HDFC (1.15 per cent) and SBI (0.37 per cent).