The damage-control exercise by the government is expected to provide some relief
The Indian market is likely to open sideways after the government clarified that there is no need to panic as while the Centre is keen on reviewing the double tax avoidance treaty with Mauritius no date has been fixed for talks between the two countries. Easing of debt tensions in Greece led the US markets end higher overnight and markets in Asia to open higher in early trade on Tuesday. The SGX Nifty gained eight points to 5,273 compared to its previous close of 5,265.
The domestic market witnessed mayhem among blue-chip stocks on Monday, settling with deep cuts on reports that the government may review the double taxation treaty with Mauritius, a major channel of funds into India. Stock-specific news also contributed to the slide.
The market opened with minor gains, with investors cautious due to concerns over the possible ripple-effect of the debt crisis in Europe. The Sensex resumed trade at 17,925, up 54 points from its previous close and the Nifty was six points higher at 5,372. The opening on the Sensex was its intra-day high and the Nifty scaled its high soon after, touching 5,377.
Talk about a likely review of the double taxation avoidance agreement with Mauritius pushed the indices to the day's low in the first hour of trade. At the intra-day lows, the Sensex dived 557 points to 17,314 and the Nifty retraced 170 points at 5,196.
The market bounced back from the day's low and was range-bound in subsequent trade, ending sharply lower. The Sensex closed at 17,507, a huge 364 points drop and the Nifty finished at 5,258, a 109 points slump.
These closing lows on the Sensex and the Nifty were last seen on 11 February 2011. The market has broken recent bottoms and has reached the level touched four months back. The indices are set to fall further with no immediate support in view. To know where the market will head in the next few days watch for today’s move. If Monday’s lows hold, we can expect some stability.
Wall Street closed higher overnight on easing of Greece’s debt problems after euro zone finance ministers gave Greece two weeks time to approve harsher austerity measures in return for more emergency loans. Investors resorted to bargain hunting after the recent decline in the markets. However, analysts opined that the downtrend may not be over. Meanwhile, the keenly watched two-day meeting of the Federal Open Market Committee (FOMC) gets underway tonight. The FOMC is expected to refrain from making any comment for another round of quantitative easing and is also expected to hold rates steady between zero and 0.25%.
The Dow gained 76.02 points (0.63%) to end at 12,080.38. The S&P 500 added 6.86 points (0.54%) to 1,278.36 and the Nasdaq rose 13.18 points (0.50%) to 2,629.66.
Markets in Asia were in the green in early trade today, supported by easing of Greece’s debt issues. Meanwhile, China’s central bank has tightened controls on offshore yuan deals to curb speculation in the currency. Under the rules, offshore banks that settle trade in the Chinese currency must tighten checks on clients’ yuan transactions to ensure any buying or selling of the currency is backed by ‘real’ trade or business needs.
The Shanghai Composite gained 0.48%, the Hang Seng rose 0.69%, the Jakarta Composite climbed 0.65%, the KLSE Composite added 0.03%, the Nikkei surged 0.89%, the Straits Times was up 0.73%, the Seoul Composite rose 0.55% and the Taiwan Weighted was 0.55% higher.
Back home, the Cabinet Committee on Economic Affairs (CCEA) may this week consider giving nod to London-listed mining group Vedanta Resources’ $9.4 billion takeover of Cairn India after imposing stringent conditions.
Oil minister S Jaipal Reddy said the CCEA, chaired by prime minister Manmohan Singh, may meet this week to consider giving the government nod based on recommendations of a Group of Ministers that went into the issue of granting approval to Cairn India’s parent firm, Cairn Energy, selling its stake to Vedanta.