India Stocks Fall as Super-Rich Tax on Foreign Fund Trusts Stays

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India Stocks Fall as Super-Rich Tax on Foreign Fund Trusts Stays

Forex55 minutes ago (Jul 19, 2019 01:10AM ET)

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© Bloomberg. Pedestrians look up at an electronic ticker board showing a budget news report outside the Bombay Stock Exchange (BSE) in Mumbai, India, on Thursday, Feb. 1, 2018. Prime Minister Narendra Modi’s government ended a tax break on equity investments as it taps the stock market boom to boost its coffers.

(Bloomberg) — India stocks fell on disappointment that the government didn’t offer any respite to foreign investors registered as trusts from the proposed super-rich tax.

The S&P BSE Sensex dropped 0.5% to 38,711.16 as of 10 a.m. in Mumbai after rising as much as 0.4%. For the week, the gauge is little changed. The NSE Nifty 50 Index declined 0.6%.

In reply to the debate over the finance bill in the Parliament late Thursday, Finance Minister Nirmala Sitharaman said that FPIs registered as trusts may consider the option of registering as companies.

A higher surcharge on wealthy Indians in the budget had spooked overseas investors as it also applied to trusts — a structure of choice for a several foreign funds that invest in India.

“If an existing FPI restructures itself from a trust to a corporate entity, then it may have to provide a non-tax commercial rationale for doing so,” said Punit Shah, a partner at Mumbai-based Dhruva Advisors LLP. “The migration to a corporate structure could also entail additional capital gains tax burden.”

Reliance Industries Ltd. is scheduled to announce results later in the day. Of the five Nifty companies that have announced earnings so far, four have either met or exceeded analyst estimates.

Strategist View

  • “Market sentiment remains weak and every upside is being sold into,” said Jitendra Panda, managing director at Kolkata-based Peerless Securities Ltd. “It is only a few heavyweights that are holding up the index while almost all sectors are beginning to crack.”

The Numbers

  • All but one of the 19 sector sub-indexes compiled by BSE Ltd. declined led by a gauge of vehicle manufacturers
  • Reliance Industries contributed most to the index decline, decreasing 0.63%; Yes Bank had the largest drop, falling 2.2%
  • Cyient falls 9.5% after 1Q net income missed estimate and its rating was cut

Analyst Notes/Equity-Related Stories

  • Small-Cap Misery Seen Ending in India Thanks to Rate Cuts (1)

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