Bloomberg News

India’s Nifty Stock Futures Drop on Signs Europe Slowing

July 05, 2012

Indian stocks climbed for the third day on expectation the European Central Bank will cut interest rate, and as a key adviser to the Prime Minister said tax rules for foreign investors should not be changed.

Tata Motors Ltd. (TTMT), the owner of Jaguar Land Rover, rose for the first time this week. ICICI Bank Ltd. (ICICIBC), the second-biggest lender, gained to its highest price since March. The BSE India Sensitive Index (SENSEX) added 0.4 percent to 17,530.30, according to preliminary closing prices at 3:30 p.m. in Mumbai.

The ECB may reduce its key borrowing cost to a record-low 0.75 percent today to boost growth in the region, India’s top trading partner, according to a Bloomberg survey. India should “clarify” that it does not intend to alter the way overseas investments in local stocks and bonds are taxed, as the nation prepares rules to clamp down on tax avoidance, Montek Singh Ahluwalia, deputy chairman of the Planning Commission, said in an interview to Bloomberg UTV today.

“Sentiments have turned, both globally and locally, and investors are thinking it’s better to stay invested rather than stay out,” D.K. Aggarwal, the New Delhi-based chairman of SMC Investments & Advisors Ltd., said in an interview today. “The expectation is that policy makers will announce steps to boost growth. No one wants to be left behind.”

The Sensex has risen 3.7 percent since June 26 when Prime Minister Manmohan Singh decided to lead the country’s finance ministry after Pranab Mukherjee quit to vie for the presidency. Mukherjee outlined steps to tackle tax avoidance, the so-called General Anti-Avoidance Rule, in his budget speech on March 16, before retreating on the plan in May by delaying implementation until 2013 to salvage investor confidence.

“I hope they will clarify it in a way in which foreign institutional investors will be reassured that their investment is welcome,” Ahluwalia said.

Singh has made reviving investment in India a priority, with growth at a nine-year low. Ahluwalia also said he hopes the government will “very soon” allow foreign companies to open supermarkets selling multiple brands, an industry closed off to foreigners and one that Singh is trying to open up.

The Sensex has gained 13.5 percent this year and trades at 13.8 times estimated earnings, compared with 10.2 times on the MSCI Emerging Markets Index. Valuations have rebounded from a three-year low of 12.4 times set on May 23.

Overseas funds bought a net $102 million of Indian stocks on July 3, raising their investment this year to $9.3 billion, according to the nation’s market regulator. That’s a record for the period, according to data compiled by Bloomberg.

To contact the reporter on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net


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