Sensex provisionally up 1.33%; ITC scales record high

Key benchmark indices surged in choppy trade after television reports said the government will not target participatory notes in a blanket manner under its newly proposed rules targeting tax avoidance. The barometer index, BSE Sensex, was provisionally up 227.28 points or 1.33%, up 218.90 points from the day's low and off 86.78 points from the day's high. The market breadth was negative. Index heavyweight Reliance Industries (RIL) logged small gains in volatile trade. Cigarette maker ITC scaled a record high. Software pivotals rose after the US Federal Reserve Chairman Ben Bernanke on Monday, 26 March 2012, said easy monetary policy would remain in place for some time even though the US economy has shown signs of improvement. Banking pivotals edged higher in volatile trade. Cairn India rose as crude price rose. Maruti Suzuki India declined after the Maharashtra state government increased the tax on petrol and diesel cars sold in state in the budget for 2012-13 tabled in the Maharashtra assembly on Monday by state finance minister and deputy chief minister Ajit Pawar. TV reports citing unnamed finance ministry officials said that the finance ministry will not be chasing after P-notes, or derivative products that allow foreign investors to invest anonymously into Indian equities, as part of its recently proposed General Anti-Avoidance Rule (GAAR) which come into effect from 1 April 2012. Participatory Notes or P-Notes are instruments issued by registered foreign institutional investors to overseas investors, who wish to invest in the Indian stock markets without registering themselves with the market regulator, the Securities and Exchange Board of India (Sebi). Only participatory notes which fail certain regulatory tests may be subject to taxation, the reports said. GAAR will help the tax authority deal with commercial transactions that are structured essentially to circumvent tax laws and avoid paying taxes. If the revenue authority concludes that a transaction by any entity is aimed primarily at avoiding taxes, it will be able to deny tax benefits claimed by the entity. The detailed guideline that is expected to be issued will provide some clues on how the GAAR provisions are to be applied in practice. Investments coming to India through tax havens like Mauritius could also be subject to General Anti-Avoidance Rules. A large portion of FIIs investing into India are domiciled in Mauritius. The double taxation avoidance agreement (DTAA) that India has signed with Mauritius enables tax on securities transaction to be taxed in the country where the company is resident. Since capital gains tax rate in Mauritius is zero, foreign investors buying or selling Indian stocks through the Mauritius route get away by paying no capital gains tax. The market pared gains after a firm start triggered by higher Asian shares. The market further pared gains in morning trade. Volatility ruled the roost as the key benchmark indices regained strength in mid-morning trade after erasing almost all intraday gains in morning trade after a firm opening. Intraday volatility continued as key benchmark indices once again pared gains in early afternoon trade. The market retained positive zone in afternoon trade as European shares rose in early trade. Volatility ruled the roost as key benchmark indices pared gains after a sudden surge in mid-afternoon trade triggered by television reports that the government will not target participatory notes in a blanket manner under its newly proposed rules targeting tax avoidance. The market regained strength in late trade. The market may remain volatile this week as traders roll over positions from the near-month March 2012 series to April 2012 series. The March 2012 derivatives contracts expire on Thursday, 29 March 2012. As per provisional closing, the BSE Sensex was up 227.28 points or 1.33% to 17,280.06. The index jumped 314.06 points at the day's high of 17,366.84 in mid-afternoon trade. The index rose 8.38 points at the day's low of 17,061.16 in morning trade. The S&P CNX Nifty was up 69.95 points or 1.35% to 5,254.20. The index hit a high of 5,277.95 in intraday trade, its highest level since 23 March 2012. The index hit a low of 5,184.65 in intraday trade. The market breadth, indicating the overall health of the market, was negative. On BSE, 1,737 shares declined and 1,234 shares gained. A total of 120 shares were unchanged. The total turnover on BSE amounted to Rs 2875 crore, lower than Monday's turnover of Rs 3801.28 crore. From the 30-share Sensex pack, 26 stocks gained while the only four of them declined. DLF (up 4.36%), Hindustan Unilever (up 3.47%), and Sterlite Industries (India) (up 3.56%), edged higher from the Sensex pack. Cigarette maker ITC rose 1.67% to Rs 225.70. The stock had hit a record high of Rs 226.90 in intraday trade today, 27 March 2012. The Union Budget 2012-13 imposed an additional ad-valorem excise on cigarettes, while keeping the fixed rate structure constant. The additional levy is at the rate of 10% on 50% of retail selling price (MRP), which effectively works out to 5% of MRP. This additional levy is on cigarettes above 65 mm of length, which covers almost the entire cigarette portfolio of ITC. Analysts reckon that ITC may go for medication of length of some of its lower-end brands (reduce the length to sub-65mm) to avoid the additional levy on some part of its portfolio. Index heavyweight Reliance Industries (RIL) rose 0.23% to Rs 731.50. The stock hit high of Rs 739.70 and low of Rs 725.20. The board of directors of RIL at its meeting held on Friday, 23 March 2012, approved a scheme of arrangement for amalgamation of Reliance Jamnagar Infrastructure (RJIL) -- a wholly-owned unlisted subsidiary of RIL -- with RIL. RIL, being the holding and transferee company, the entire issued, subscribed and paid up capital of RJIL will get cancelled and no news shares of RIL will be issued, RIL said. Cairn India rose 1.74% as crude oil prices rose. US crude futures for April 2012 delivery were up 23 cents to $107.26 a barrel in Asian electronic trading today, 27 March 2012. Higher crude oil prices will result in higher realization from crude sales for oil exploration firms like Cairn India. Software pivotals rose after the US Federal Reserve Chairman Ben Bernanke on Monday, 26 March 2012, said easy monetary policy would remain in place for some time even though the US economy has shown signs of improvement. US is the biggest outsourcing market for Indian IT firms. India's second largest software services exporter by revenue Infosys gained 1.82%. India's largest software services exporter by revenue TCS advanced 0.79%. India's third largest software services exporter by revenues Wipro rose 1.27% Banking pivotals edged higher in volatile trade. India's biggest private sector bank in terms of net profit ICICI Bank rose 1.16% to Rs 882, off day's low of Rs 852.15. Reportedly the bank has asked Kingfisher Airlines to top up its loan security or adjust the loan amount after the ailing carrier's stock took a severe beating in recent weeks. ICICI Bank had lent about Rs 430 crore to Kingfisher, report indicated. Kingfisher, which has debts of $1.3 billion, is scrambling to raise funds after banks refused to lend more for its day-to-day operations. Shares of Kingfisher Airlines rose 0.30%. India's second largest bank by net profit HDFC Bank rose 1.48%. India's largest bank by branch network State Bank of India rose 0.65%. India's largest small car maker by sales Maruti Suzuki India lost 1.93% to Rs 1273.35 and was the top loser from the Sensex pack. The stock declined after the Maharashtra state government increased the tax on petrol and diesel cars sold in state in the budget for 2012-13 tabled in the Maharashtra assembly on Monday by state finance minister and deputy chief minister Ajit Pawar. The tax rate on diesel cars and jeeps will be increased by 4%, while for petrol vehicles, it will go up by 2%. India's largest commercial vehicle maker by sales Tata Motors rose 2.13%. Jaguar Land Rover PLC, a unit of Tata Motors, has announced the pricing of 500 million pound Senior Notes due 2020 at a coupon of 8.25% per annum. The announcement was made after trading hours on Monday, 26 March 2012. The notes will be guaranteed by Jaguar Cars, Land Rover, Jaguar Land Rover North America, Land Rover Exports and Jaguar Cars Exports. The net proceeds from the issuance and sale of the notes will be used for general corporate purposes, JLR said. Engineering & construction major Larsen & Toubro (L&T) advanced 2.25%. During market hours today, 27 March 2012, L&T said its construction division has won a contract worth Rs 1700 crore from Tata Steel for the latter's new 6 million tonnes per annum steel plant being set up at Kalinganagar in Odisha. As part of the greenfield steel plant, L&T is executing a slew of projects like blast furnace, sinter plant, coke oven, balance of plant for steel melt shop, hot strip mill, utilities and construction works for other areas, L&T said. Coal India shed 0.09% on reports the state-run coal miner's independent directors on the board have blocked a proposal to sign 20-year fuel supply agreements with power producers with a guarantee to meet at least 80% of the commitment under government orders. The reason why the independent directors have opposed the move is that the level of minimum supply guarantee will be unfair to the company since it would be nearly impossible to fulfill the condition, reports suggest. India's largest power generation firm by capacity NTPC rose 0.21%. NTPC has signed a Commercial Interest Reference Rate (CIRR) based fixed interest rate term loan facility backed by Euler Hermes of euro 72.5 million with KfW, Germany. The loan will be utilized to fund the capital expenditure on Barh, Stage-II project located in the state of Bihar, NTPC said. The loan has a door to door maturity of 14 years. The announcement was made after trading hours on Monday, 26 March 2012. Foreign institutional investors (FIIs) sold shares worth a net Rs 135.29 crore on Monday, 26 March 2012, as per provisional data from the stock exchanges. Earlier FIIs had made substantial purchases of Indian stocks with their inflow totaling Rs 7305.48 crore in 11 trading sessions from 9 to 23 March 2012, as per provisional data from the stock exchanges. The next major trigger for the market is Q4 March 2012 earnings. Investors will focus on the guidance provided by the management for the year ending March 2013 (FY 2013) to gauge the earnings outlook. The Q4 earnings season will begin in mid April 2012. Advance tax payout of top Indian firms for the last installment of 15 March 2012 was largely flat. A muted advance tax payment indicates that the revenues and profits of companies are under stress. Companies have to pay advance tax on their projected earnings a fortnight before the end of every quarter. European stocks held positive zone on Tuesday after Federal Reserve Chairman Ben Bernanke emphasized that low interest rates are still needed to support the US labor market. Key benchmark indices in France, Germany and UK were up by between 0.29% to 0.61%. German Chancellor Angela Merkel on Monday said Germany may back plans for the temporary and permanent euro-area rescue funds to run in parallel. European finance ministers meet on Friday, 30 March 2012 to discuss raising a 500 billion-euro ($664 billion) ceiling on the region's financial firewall. Asian shares edged higher on Tuesday after Federal Reserve Chairman Ben Bernanke said easy monetary policy would remain in place for some time even though the US economy has shown signs of improvement. Key benchmark indices in Indonesia, Singapore, Hong Kong, Japan, South Korea and Taiwan were up by between 0.78% to 2.36%. China's Shanghai Composite shed 0.15%. Trading in US index futures indicated that the Dow could gain 18 points at the opening bell on Tuesday, 27 March 2012. US stocks advanced Monday, 26 March 2012 after Bernanke signaled the central bank is committed to a policy that's helped stocks rally for three years. The Dow Jones Industrial Average rose 160.90 points, or 1.2%, to 13,241.63. The S&P 500 index gained 19.40 points, or 1.4%, to 1,416.51. The Nasdaq Composite index added 54.65 points, or 1.8%, to 3,122.57, which is its highest close since mid-November 2000. Bernanke said in a speech that while he's encouraged by the unemployment rate's decline, the economy still needs help. Meanwhile, the number of Americans signing contracts to buy previously owned homes held in February near an almost two-year high, a sign that the real estate market may be stabilizing.