The 30-share Bombay Stock Exchange (BSE) Sensitive Index (Sensex) lost 366.53 points or 2.17 per cent on Tuesday as foreign investors sought more clarifications on General Anti-Avoidance Rules (GAAR) proposals.
The Sensex closed at 16546.18. The fall was led by consumer goods sector with 3.44 per cent followed by information technology 3.09 per cent and banks 2.84 per cent.
A broader National Stock Exchange's S&P Nifty index closed below the 5000-mark at 4999.95, a fall of 114.20 points or 2.23 per cent.
The late trade witnessed a sudden fall in indices. The General Anti-Avoidance Rules (GAAR) was intended to be introduced from April 1, 2011. However, it has been deferred by one year.
“There also seems to be an intent to shift the onus of proof from the tax payer to the tax department, which is very welcome. However, a fundamental issue that still needs to be addressed is the trigger of GAAR itself — the draft proposal contemplates the trigger ‘where one of the main purposes is to obtain a tax benefit'. Given that ‘tax benefit' is worded unreasonably widely, one hopes that this issue will also be addressed,” said Ketan Dalal, Joint Tax Leader, PwC India.
Rupee erases early gains
Reversing day's early gains, rupee closed lower by 21 paise at 53.12 against the dollar as relief to foreign funds on strenuous GAAR provisions seemed short-lived. Forex dealers said the fall in rupee would have been steeper but for RBI's intervention. Dealers said though General Anti-Avoidance rules (GAAR) had been postponed by one year, capital flows would take sometime to come back to Indian markets.
The rupee had gained an impressive 56 paise on Monday after Finance Minister Pranab Mukherjee had deferred the implementation of GAAR by one year from April 2013 in Parliament. After touching a high of 52.68 in early trade on Tuesday, the rupee, moving in tune with the stock market, slumped to a low of 53.31 before concluding at 53.12.