All eyes on Q4

Apr 02, 2012, 07:46 IST | Alex K Mathews

The markets are going to watch out for the Q4 numbers and the RBI meet scheduled on April 17. Many experts believe that the RBI is all set to slash the interest rates this month.

The markets are going to watch out for the Q4 numbers and the RBI meet scheduled on April 17. Many experts believe that the RBI is all set to slash the interest rates this month.

Watchful: Indian investors and passers-by watch the ticker outside
the Bombay Stock Exchange (BSE) building in Mumbai. Pic/AFP

Last Thursday, the RBI decided to infuse Rs 10,000 crore via Open Market Operations (OMOs) to ease the liquidity crunch. The central bank will buy four government securities with no individual purchase limit. These include the current 8.79 per cent 10-year benchmark government bonds maturing in 2021.  The Nifty has resistance at 5385 and 5450.  The support for the Nifty lies at 5200 and 5160.  Aggressive traders can buy Nifty 5500 call options for short-term perspective.

Major development

Another major development was the implication of General Anti Avoidance Rule (GAAR), on widely used P-notes. GAAR, which was included in the Finance Act in the budget. The new rules give the taxman the authority to go deeper into transactions entered particularly for avoiding tax and would see companies end up spilling more for tax. To further fuel the sentiment, the Finance Minister said that he does not want the country to become a no-tax or a low tax regime. Foreign institutions, which route money through countries, entered into Double Taxation Avoidance Agreement (DTAA) with India.

Tax authorities could use the GAAR to deny the benefits of the DTAA to a private investment fund or vehicle organized in Mauritius and holding a Mauritius tax residency certificate if the beneficial owners of that fund or vehicle are mostly Americans, Europeans or other non-Mauritius investors. Industry body, Asia Securities Industry & Financial Markets Association (ASIFMA) had even written a letter to the FM expressing their concern over the recent decision giving the income tax officials the powers to retrospectively tax the indirect transfer of assets and tax evaders misusing GAAR provisions to avoid tax routing money through tax havens. Last Friday, the Finance Minister said, "Persons investing in stock markets through participatory notes will not have to pay taxes in India." This assurance lifted the market sentiments and Nifty closed at 5295.  The FM also said that necessary clarifications will be issued, also mentioned that the income tax department would examine the tax liability of the FIIs."

Apart from that we saw tremendous selling in realty stocks especially those having assets in Mumbai . This was due to reports that stated Maharashtra government may hike the stamp duty by 160 times for leave-and-license agreements for residential and commercial properties.

The government has proposed 0.1 per cent stamp duty on the market value of the residential property, or 1 per cent of the premium plus average annual rent (deposit) paid (whichever is higher) for up to 36 months.
For commercial lease agreements, the duty for 60 months would be 0.4 per cent of the property value. Also the government and RBI have stuck to the tested borrowing formula and intend to raise Rs 3.7 lakh crore from the market by issuing bonds during the first half of 2012-13. This works out to around 65 per cent of the total market borrowings estimated at Rs 5.7 lakh crore in the next financial year. On an average, the government will borrow around Rs 15,000 crore every week.

Investors can buy Mahindra and Mahindra, ACC, TISCO and Coal India for short-term perspective.  Stock call options of BHEL and HUL are advisable for investments.  Orchid Chemicals is likely to move above Rs 200 levels in the short term can be bought with a stoploss below Rs175. Crude is weak below $105.60 and it may try to test $102 and $101.26.  Movements below these two levels can bring down the price towards $95.35.

Alex K Mathews is the author of Financial Services And Systems, as well as Option Trading: Bear Market Strategies published by Tata McGraw Hill. He is also the technical and derivatives research head of Geojit BNP Paribas Financial Services Ltd. The author may have a vested interest in investments he has recommended. Feel free to e-mail him at Geojit BNP Paribas has membership in, and is listed on, the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).

Disclaimer: No financial information whatsoever published anywhere in this newspaper should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is  for educational and information purposes only and under no circumstances should be used for actual trading or making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment or trading decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at his or her risk.

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