Indian stocks advanced for the first time in six days as industrials gained in the last hour of trade to counter losses in energy companies and software exporters.
Larsen & Toubro Ltd. jumped 3.4 percent, helping a gauge of engineering companies end a five-day, 5.8 percent retreat. Hero MotoCorp Ltd., the largest motorcycle maker, jumped the most since Dec. 1, while Mahindra & Mahindra Ltd., a tractor maker, increased for a second day. Wipro Ltd. was the biggest decliner on the S&P BSE Sensex after Morgan Stanley said the software maker’s first-quarter outlook was disappointing.
The Sensex rallied 0.8 percent to 27,890.13 at the close after falling 1.1 percent intraday. India will close back-tax claims against foreign investors covered by a double taxation avoidance treaty, Anita Kapur, chairwoman of the Central Board of Direct Taxes, said in a phone interview today. The 30-stock gauge slid 4.7 percent in the five days through Tuesday amid concerns that profit growth will decline.
“The tax clarification is a sentiment booster for the market,” Anita Gandhi, director at Arihant Capital Markets Ltd., said by phone from Mumbai today. “A substantial segment of foreign investors will get relief from the clarification.”
Tax authorities expect 400 billion rupees ($6.4 billion) in back-tax claims from global investors, a finance ministry official said in New Delhi yesterday, asking not to be identified citing rules. Finance Minister Arun Jaitley told NDTV 24X7 television channel last week that the dues were legitimate as investors, who had petitioned the courts, had lost their appeal. The tax has been scrapped under new tax laws starting April 1.
India will offer treaty benefits to eligible overseas investors and stand by the agreement, Kapur said.
The Sensex tumbled intraday after the weather office said that rains in the June-September period would be 93 percent of a 50-year average amid El Nino weather conditions. The monsoon is the main source of irrigation for the nation’s 235 million farmers. A smaller crop can boost food costs and may limit the room for the central bank to ease interest rates.
“A seven percent deficit is not discomforting at all,” Chokkalingam G., managing director at Mumbai-based Equinomics Research Pvt., said in an interview with Bloomberg TV India. “We were due for a rebound” and the clarification on tax dues from foreigners countered the monsoon forecast, he said.
Larsen & Toubro Ltd. jumped 3.4 percent, the top gainer on the S&P BSE Capital Goods Index. Hero MotoCorp rose 3.5 percent and Mahindra & Mahindra gained 1.9 percent.
Sun Pharmaceutical Industries Ltd. increased 1.6 percent, rebounding from its biggest loss since June 2009 on Tuesday after Tokyo-based Daiichi Sankyo Co. sold its stake worth $3.2 billion in the drugmaker.
Purchases of Sun Pharma shares by foreigners helped boost inflows into local shares to a record $2.6 billion on Tuesday, data from exchanges how. Overseas funds withdrew $386 million in four days through Monday, the data show.
Some global funds sold Indian shares to invest in China, where the Shanghai Composite Index surged to a seven-year high yesterday, according to Binay Chandgothia, a portfolio manager at Principal Global Investors.
“India has been a consensus overweight in the past year and now we have a situation where there is strong momentum in China,” Chandgothia said in an interview with Bloomberg TV India today from Hong Kong. “The tactical shift is responsible for allocations going away to China from India.”
The Sensex has gained 1.4 percent this year and trades at 15.5 times projected 12-month earnings, compared with the MSCI Emerging Markets Index’s multiple of 12.6.