Foreign flavour

Published: 02 December, 2013 02:01 IST | Foreign flavour |

No stamp duty or capital gains tax for foreign banks planning to convert wholly-owned subsidiaries

On the back of mixed cues on both, the domestic and global fronts, Nifty closed at around 3 per cent on a weekly basis. Niftyoutlook continues to be sideways and has strong support at 6000 and 5972 levels. With this support, Nifty may try to break 6300 levels in the near term, and this could be ahead of the state election results. On a weekly basis, last week, Nifty was up around 4.3 per cent and the midcap and smallcap indices closed up around 3.2 per cent and 1.8 per cent respectively. 

The Reserve Bank of India (RBI) said that, foreign banks, which are planning to convert wholly-owned subsidiaries in the country, will not attract any capital gains tax or stamp duty. The central bank clarified that a new section 8E can be inserted in the Indian Stamp Act, 1899 vide banking Laws (Amendment) Act 2012, which allows exemption from stamp duty on any conversion of a branch of a foreign bank, into wholly-owned subsidiary. The RBI has prescribed R 500 crore as a minimum paid-up equity capital or net worth for a wholly-owned subsidiary. But it gave foreign banks rights to operate in India before August 2010, and the option to continue their operations in branch model.

In order to bar foreign companies from taking control of critical care drugs, the Union Cabinet deferred a proposal for changes in Foreign Direct Investment (FDI) policy, for the pharmaceutical sector. During the meeting, the cabinet also did not take up the proposal to liberalise FDI norms, for the housing sector. The department of Industrial Policy and Promotion (DIPP) has proposed reducing FDI caps in ‘rare or critical pharma verticals’ to 49 per cent from 100 per cent. SEBI is planning to allow public sector financial institutions, scheduled banks and Non Banking Financial Company (NBFCs) to file shelf prospectus, for issuance of non convertible debt securities. The shelf prospectus allows frequent issuers to raise money without filing separate prospectus for every issuance. The market watchdog has also suggested allowing issuers, authorized by Central Board of Direct Taxes (CBDT), to make public tax-free secured bonds to file shelf prospectus.

Last Friday, the Bombay Stock Exchange (BSE) launched currency derivative trading platform, making it the fourth bourse in the country to offer such a facility. The stock exchange has started currency futures trade on the contracts on US dollar-Indian Rupee, Euro-Indian Rupee, British Pound-Indian Rupee and Japanese Yen-Indian Rupee.  Also, currency trading on the contracts on US dollar-Indian Rupee has commenced on the same day. BSE has decided not to levy any transaction charges under further notice, for encouraging the currency platform. 

The US markets remained on the higher side last week, on the back of encouraging economic data. Positive triggers came out from labour market; a drop was witnessed in the initial jobless claims, falling to the lowest level since September. The consumer confidence report also supported the markets. On the gloomier side, the durable goods order dropped 2 per cent in October. The US markets remained closed on Thursday on the account of Thanksgiving. Other markets, around the world, were simply tracking the US market’s movements. On the Chinese front, HSBC manufacturing PMI final, non manufacturing PMI and HSBC services PMI data will be focused. For US markets, the major events to watch out for include ISM data like Manufacturing Index, ISM non manufacturing PMI, construction spending, initial jobless claims, GDP growth rate, continuing jobless claims and Non-farm payroll data.

This week, HSBC manufacturing and services PMI will be in focus. The outlook for gold is weak, and it is having support at $1236 and $1215. Gold has resistance at $1252 and $1265. Movements like these can help firm up the prices. Concerns of early stimulus withdrawal in the US are major reasons for weakness. Orchid Chemicals, Wheels India, WYETH, SUNTV, RAMCO Cements, ABAN, West coast Paper, Panacea Biotec, India cements, Unichem Laboratories and Ranbaxy are positive and investors with short term perspective, can buy the same.

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 and the Bombay Stock Exchange.

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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