India Sensex Drops to 5-Week Low as Modi Hints at Raising Taxes

Updated on
  • Drugmakers, banks lead fall, taking gauge’s 2016 loss to 1.2%
  • NSE Nifty 50 Index trading volume 40% below the 30-day mean

Indian stocks fell to the lowest level in more than a month after Prime Minister Narendra Modi hinted at raising taxes on income from share trading.

Tax payment from individuals profiting from stock-market investments is low and there’s a need to find ways to ensure levies are raised in a fair, efficient and transparent way, Modi said over the weekend.

The benchmark Sensex dropped 0.9 percent at the close in Mumbai. The gauge, now down 1.2 percent for 2016, has fallen for nine of the past 11 days amid concern a cash crunch caused by the government’s move to invalidate high-value bank notes will crimp economic growth. Monday’s trading volume on the NSE Nifty 50 Index was 40 percent lower than the 30-day mean.

“Fears of excessive taxation by the government and the cash crunch is leading the market fall,” Chakri Lokapriya, the Mumbai-based managing director at TCG Advisory Services Ltd., which manages about $3 billion, said by phone.

Twenty five of the 30 members on the benchmark S&P BSE Sensex fell. Cipla Ltd. slipped 4.7 percent and Lupin Ltd. declined 3 percent. Drugmaker Divi’s Laboratories Ltd., not a part of the gauge, slid 12 percent, dropping for a third day; the company plans to respond to U.S. FDA observations made in an inspection of its plant within the time allowed, it said in response to an exchange query following a CNBC TV report on Friday, when the stock sank 22 percent.

State Bank of India retreated 2 percent while Axis Bank Ltd. lost 1.4 percent in a seventh day of declines, the longest losing run since Jan. 2014.

Overseas investors have sold almost $500 million of local stocks this month, after a $2.6 billion net outflow in November, as uncertainty over economic growth and corporate profits persisted after India’s decision on Nov. 8 to ban high-denomination banknotes.

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