Sensex plunges further as super-rich tax on foreign trusts stays

Indian markets on Monday fell another 1% after to hit a fresh two-month low as investors were disappointed after the government refused any respite to foreign investors registered as trusts from proposed super-rich tax. Sentiments were also weakened after the Reserve Bank of India governor said future interest-rate cuts would be depend on incoming data. Gains in crude oil for second consecutive session also raised concerns of higher inflation and fiscal slippage.

Benchmark index Sensex was down 1% or 384.41 points at 37,952.60, while Nifty 50 share index fell 1% or 112.80 points to 11306.45.

“Markets fell due to continuous FPI outflow, geo-political tension between the US and Iran and anxiety around the earnings,” said an analyst who declined to be named.

The RBI’s future policy action will depend on incoming economic data after a series of moves this year that Governor Shaktikanta Das says are equivalent to 100 basis points of interest-rate cuts, Bloomberg News said.

“The accommodative stance will depend on how inflation numbers look, how the growth numbers look. Primarily on how inflation looks,” Das said.

Foreign investors have cut its position for ninth consecutive sessions in domestic equity market, selling nearly $670 million worth of domestic equities. Foreign investors have started selling in local markets after the Union budget had proposed raising the income tax surcharge on taxpayers with income in the ?2-5 crore range from 15% to 25%, and from 15% to 37% for those earning more. This takes the effective tax rate for those two groups to 39% and 42.74%, respectively.

“A general sense of despondency among institutional and non-institutional players seem to be dragging down the markets. A series of unexciting results for Q1FY20, reinforced expectations that India Inc’s corporate earnings are not going to revive in a hurry. However shift to quality stocks that have performed well in Q1 continued,” said Deepak Jasani, head of retail research at HDFC Securities..

Private Banks were trading lower. HDFC Bank fell 3%, Indusind Bank 1.8%, Kotak Mahindra Bank 1.6%, ICICI Bank 1%.

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