BSE Sensex, Nifty wait for breakout: Friday Closing Report

The bias remains downward for the medium-term

The market closed in the red on disappointing earnings reports and global concerns. Today the Nifty moved in a narrow range of 5,642 and 5,697 and closed in the negative, making the lowest closing in the past six days (including today). The index made a lower low and saw a lower high for the third consecutive day. The Nifty is in an indecisive zone. However the bias is downward for the medium-term. The National Stock Exchange (NSE) saw volume of 61.90 crore shares and an advance decline ratio of 588:1161.       


The domestic market opened in the negative on all- round profit taking after recent gains. Mixed sentiment across the globe following not-so-impressive earnings reports also weighed on the sentiments. The Nifty opened 21 points down at 5,684 and the Sensex started off at 18,715, down 44 points from its previous close.


Buying in select stocks saw the benchmarks hit their intraday highs in early trade itself, albeit in the negative. At the highs, the Nifty rose to 5,697 and the Sensex went up to 18,730. However, the market couldn’t maintain the gains and drifted further southwards in subsequent trade on selling pressure in fast moving consumer goods, healthcare and oil sectors.


A soft opening of the European markets added to the woes in the local market as the indices extended their gains in noon trade. The benchmarks fell to their lows shortly after 2.00pm with the Nifty going back to 5,642 and the Sensex dropping to 18,558.


The market witnessed a small recovery and closed off the lows, but in the red. The Nifty settled 41 points (0.72%) lower at 5,664 and the Sensex finished the session at 18,625, down 133 points (0.71%).


The broader markets underperformed the Sensex today. The BSE Mid-cap index declined 0.84% and the BSE Small-cap index dropped 1.05%.


Except for BSE Auto (up 0.81%), all other sectoral gauges settled lower. They were led by BSE Consumer Durables (down 2.84%); BSE Fast Moving Consumer Goods (down 1.78%); BSE Healthcare (down 1.20%); BSE PSU (down 1.15%) and BSE Power (down 1.06%).


Eight of the 30 stocks on the Sensex closed in the positive. The chief gainers were Mahindra & Mahindra (up 2.57%); Bajaj Auto (up 1.72%); Hero MotoCorp (up 1.68%); GAIL India (up 0.83%) and BHEL (up 0.73%). The top losers were Hindustan Unilever (down 2.14%); ITC (down 2%); Cipla (down 1.84%); Dr Reddy’s Laboratories (down 1.59%) and Reliance Industries (down 1.39%).


The top two A Group gainers on the BSE were—United Breweries (up 4.94%) and Emami (up 4.01%)..

The top two A Group losers on the BSE were—CESC (down 15.32%) and Lanco Infratech (down 10.77%).


The top two B Group gainers on the BSE were—Intec Capital (up 17.49%) and Fintech Communications (up 16.38%).

The top two B Group losers on the BSE were—Centerac Technologies (down 19.94%) and Orissa Sponge Iron & Steel (down 14.65%).


Out of the 50 stocks listed on the Nifty, 15 stocks settled in the positive. The key gainers were M&M (up 3%); Hero MotoCorp (up 2.11%); Bajaj Auto (up 1.98%); Ambuja Cements (up 1.38%) and Asian Paints (up 1.23%). The main losers were Punjab National Bank (down 6.72%); Jaiprakash Associates (down 5.40%); Hindustan Unilever (down 2.72%); ITC (down 2.23%) and Reliance Infrastructure (down 2.15%).


Most markets in Asia were closed for the Eid holiday today, but those that were open settled lower. Investors were concerned that the global slowdown, which has already dented corporate earnings, is expected to impact exports from the region.


The Shanghai Composite tanked 1.68%; the Hang Seng dropped 1.21%; the Nikkei 225 declined 1.35%; the Seoul Composite tumbled 172% and the Taiwan Weighted settled 1.76% down. Financial markets in Singapore, Malaysia, Indonesia and the Philippines were closed today.


At the time of writing, key benchmarks in Europe were down between 0.49% and 0.66% and the US stock futures were in the negative, indicating a soft opening for US stocks.


Back home, foreign institutional investors were net sellers of shares amounting to Rs551.34 crore on Thursday. On the other hand, domestic institutional investors were net buyers of equities aggregating Rs34.73 crore.


German chemical major BASF today said it will invest Rs1,000 crore to set up a new manufacturing facility at Dahej in Gujarat by March 2014. Besides the domestic market, the plant will export chemicals to other nations including Pakistan, Sri Lanka, Bangladesh, Thailand and some other Asean countries. The stock declined 0.78% to settle at Rs659.50 on the NSE.


Mahindra Holidays & Resorts will soon start a full-fledged office in Dubai to enrol Indians living there as its members. As at the end of September, Mahindra Holidays had 151,200 members. During the quarter ended September, the company added 4,162 members. The stock rose 0.04% to settle at Rs282 on the NSE.


American Diary: 11 days to go back to the Big Apple

Ready for the last phase of the US presidential elections? Our Special Correspondent will keep you updated on all the latest trends, moves, moods and swings of the Obama-Romney duel

It was good to read the New York Times (NYT) this morning saying that Virginia, Colorado, Ohio and Wisconsin are four of the swing states where the US Presidential election will be decided. I am going to be in all these four states over the next eleven days bringing you the latest happenings in the keenly-contested presidential election, which will also decide who is the most powerful man on the planet.
As I leave Westchester for New York on a cool morning—the trees are on fire—the yellows browns and reds are quite spectacular and I cannot but wonder if the US will turn red on 6th November. I am in for a bit of a disappointment on reaching Columbia Law School as Professor Jack Greenberg co-counsel in the iconic case of Brown Vs Board of Education  (who argued 40 matters before the Supreme Court)  says he is not feeling well and can only talk to me on the phone. So I ask him, “did you imagine in 1954 when the Brown case was argued that America would have a black President in about 50 years after?” He said, “It never crossed my mind”. I asked him, would he have been surprised at such a thought? He replies, “Of course I would have been surprised.” 
Revisionists are now arguing that it wasn’t Brown which desegregated America but rather Lyndon Johnson’s Civil Rights Act, I said to Mr Greenberg. His response was that Brown made the Civil Rights Act possible by bringing about compulsory bussing and desegregation. 
I chat a little more about what-ifs and if-nots about the process that ultimately let to Barak Obama being elected the first black President of the US.
I then amble onto Broadway and notice that much has changed. But that is an abiding theme in New York—if you come back after three years, you will not recognise the neighbourhood. Since I am a little early for my next appointment, I step into a small takeout-cum-deli called Nassbaum and Wu where I get talking to an old Indian looking gentleman called Rusi Patel from Karachi who worked at IBM for 30 years, has two kids who are both professors at New York University and who says he is the only independent on the west side of Manhattan. 
Patel then launches into a blistering criticism of Obama who he voted for four years ago. He is particularly miffed at the Health Care Bill—“Do you know doctors have stopped taking new patients on medicare because there has been no increase in remuneration? Do you know that the law is completely opaque and indecipherable? Do you know they circumvented the filibuster by making it a money bill? Do you know that not one republican voted for it? Do you know that it will lead to senior rationing?” he fires rapidly. I latch on to the last bit and ask, “Senior rationing, how’s that?” He says, “If you are 85 forget about a hip transplant, you will have to be satisfied with something less? If you are 90, no bypass surgery, they will tell you it is not safe. And how can they bring 50 million people into the scheme all at once? It has to be done gradually and the board, which has no doctors on it, will decide treatments.” I cannot get in a word edge ways in this diatribe, so I say you are the only Republican on the Westside but he says no, he is only independent.
If Patel's view is an indicator of the general mood in America we are in for a change. But keep reading and I will bring you more news and views from the ground over the coming days. 
(Harsh Desai has done his BA in Political Science from St Xavier's College & Elphinstone College, Bombay and has done his Master's in Law from Columbia University in the city of New York. He is a practicing advocate at the Bombay High Court.)


Don't pay VAT to builders, says Grahak Panchayat

As the last date for paying VAT by developers on flats sold during 2006 and 2010 is nearing, several builders are sending notices and exerting pressure on buyers to cough up the money. However, consumer organisations say the deadline is for builders and flat buyers need not pay the VAT

Several home buyers from Maharashtra are complaining harassment from builders for coughing up more money as value added tax (VAT). Citing a circular issued by the Maharashtra Sales Tax Department, builders are asking flat buyers to pay the additional money before 31st October for their homes bought between 2006 and 2010. However, Pune-based Grahak Panchayat has asked buyers neither to pay any heed to these tactics from builders nor pay any money as VAT.


Following the directions from the Supreme Court, developers who would pay the VAT before 31st October would be exempted from interest and penalty. This has prompted several developers to issue second notices to flat buyers.


Several builders are even exerting pressure and also threatening to charge exorbitant interest rates or take legal action on buyers if he/she refuses to pay the money. That too when the circular issued by the Sales Tax department clearly says the developer has to pay MVAT on his/her profits. Here are the specific points mentioned in the circular under its FAQ section...


From 20.06.2006 to 31.03.2010

1. Composition Scheme U/s 42(3) Under this scheme, the developer has to pay 5% tax on the agreement value. Land deduction is not available. Input tax credit is available to the reduction of 4%.

2. Actual Expense Method U/r 58 Under rule 58, the deduction of labour & service charges is available on actual basis. Land deduction is also available. Set-off will be calculated subject to the condition u/r 53 and 54.

3. Standard Deduction Method U/r 58 Under rule 58, the deduction of land cost will be allowed. Thereafter 30% standard deduction from remaining amount will be available as per proviso to sub-rule 1. Set-off will be calculated subject to the condition u/r 53 and 54.


After 01.04.2010

The developers can opt for fourth option also, under this option u/s 42(3A), developer has to pay 1% tax on agreement value. No land deduction and input tax credit is available.


It further states: “Needless to mention that the developer will be required to make the payment of interest according to the provisions of law.”


Here is a copy of the circular issued by the Sales Tax Department...


Here is a copy of the the Supreme Court order...


On 14 September 2012, Sudhakar Velankar filed a public interest litigation (PIL) in the Bombay High Court. Here are the points mentioned in the PIL…


[A] Once the buyer pays the stamp fee for the transaction of the immovable property, VAT cannot be recovered by the builder from him/her.

[B] Agreement to Sale, of the flat under construction, does not constitute SALE. It does not give the possession of the flat. It does not give the title to the property purchased. It only assures the sale of the property on certain future date and on completion of the construction of the flat.

[C] The instalments paid under the agreement, are not “deferred payment of price” but are “advance payment of agreed price”. The payment creates a charge on the property of the builder, which is not a sale, as defined under MVAT Act.


For those buyers who have been given notices by their builders, here is the “What to do” guideline provided by the Grahak Panchayat...


It is not binding on you to give written reply to the notice, legal or otherwise, of the builder. You have liberty not to respond to the notice and not comply with the demands of VAT amount from the builder.


If you have to respond, you may respond in very precise manner as under...

  • Please write to the builder as an individual. Do not involve the society or condominium in this issue. Individually written letters, however, can be forwarded to the builder in one bunch.
  • Please send the letters in any of the following manners.

-by hand delivery/courier, insisting on receipt with stamp and date.

-By Speed Post. preserve the computerised receipt of the post office.

-By registered post AD.

  • Those who have already written letters on the receipt of first notice might have received the second notice. They should also follow the same course of action.


DRAFT Reply to the notice of the builder for demanding VAT

(Delete the part not applicable to you)









M/s …………………………



Subject: Your Notice/letter for demand of VAT


Dear Sir,


I/We have received your notice/letter dated ………. For payment of VAT amount against flat No…….  in your ………………….. project. In this regard I/We have to write to you as under:


The matter of VAT on Flat is sub-judice with Hon. High Court and till such time that the hon. Court decides the matter, I have no intention to pay tax money.


Your demand of VAT money is not in proper form. Please issue a tax invoice or bill, as the case may be, as required under the MVAT Act. On receipt of your invoice/bill, I will respond appropriately to same.


Further as promised in the registered agreement you have do the following things

1.         Formation of society

2.         Conveyance in favour of society

3.         Return of balance amount after formation of society (as per Grahak Panchayat, Pune and as per Commissioner of co-op society the charges for society formation are just Rs500/- per member hence you return the balance amount with 18% interest)

4.         As per the MSEDC guidelines and as per the information received from Grahak Panchayat Pune the electricity meter charges are just Rs3,000 to Rs10,000 per flat and you have collected Rs……………. Which are very high. Hence please give receipts of payments made to MSEDC and pay the balance amount with 18% interest.

5.         Also as per Flat Ownership Act 1963, you have to form the society within four months from date of registration of the flat agreements by the 60% consumers. But you have not formed the same. And also you have not made conveyance in favour of the society. Hence you are requested to do the needful within 30 days from receipt of this notice otherwise we will take appropriate action against you at your cost.

6.         Also as per the promise made in the agreement you have not provided amenities. Hence you please provide it.

7.         Further as MOFA 1963 you are not to collect the parking charges but you have collected illegally the parking charges of Rs……………… per head. Please return the same within 30 days with 18% interest.


We are giving you 30 days time for above all facts and if you fail to comply then we will take appropriate action against you at your cost.


Thanking you


Yours faithfully

Sign ………………………………… 



Flat buyers, who are under pressure from the builder for paying VAT can also contact Grahak Panchayat at their Pune Office. Grahak Panchayat, 2020, Sadashiv Peth, Tilak Road, Pune 411030 (Opp SP College, above Grahak Peth) on any Monday between 6pm to 7.30pm.




9 months ago

Very informative article.
I made agreement in Sep2009 & got possession in Oct2010. flat was almost ready at the time of agreement. now the builder has filed summery suit with 15% interest to recover 5% VAT.
I want to know the legality of the suit.

[email protected]


3 years ago

We have already paid the amount to the builder and now she is refusing to return the money to us. Please guide us as to what can be done

naina kalyan

3 years ago

i need to know if vat and service tax is applicable in my case. my agreement is dated june 2009 and i have not got poccession till date, although i have made all the payments. the said property is a bungalow scheme in a village(gram panchayat) .


4 years ago

The notice from builder threatens about cancelling the Agreement Sale and approaching the home loan financial institution to make us defaulter.
They also ask about penalty charges and legal threatening.
1. Can they cancel the agreement legally?
2. Can they disrupt the home loan taken by us?


4 years ago

The article is very informative. Will it make sense to send the notice mentioning other problems (instead of VAT)?

I heard that Builder is not ready to share how he has calculated the VAT amount.

jagdish chavan

4 years ago

As usual, very informative article.

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