JUBILIANT MOOD

Stock markets in India have continued their jubilation on the last trading session of the week with the benchmark equity indices extending their skyward journey and trading around session's high levels. After the gap-up opening in morning, the frontline gauges managed to capitalize on the momentum and sail beyond the important psychological 5,250 (Nifty) and 17,350 (Sensex) levels. Sentiments remained sanguine since the start of trade as domestic markets rallied in tandem with their Asian peers after some heartening developments surfaced from the Euro-zone Summit. Concerns over the Euro-zone's onerous debt trouble got allayed after reports indicating the leaders in Euro-zone decided to create a single supervisory body for euro zone banks and to allow them to be recapitalized directly by the currency area's rescue fund without adding to government debt. Moreover, European Council chairman Herman Van Rompuy's comments that nations that were meeting the terms with European Union budget policies would be able to access the bloc's temporary EFSF and permanent ESM rescue funds to support their government bonds on financial markets, fortified sentiments globally, prompting tentative recovery in investors' appetite for riskier assets like equities. The European markets too started with a sharp rally as all major equity indices traded with notable gains in the range of 1-3%. Back home, market participants remained in cheerful mood hoping that the government would soften its stand on contentious taxation issues and bring in more clarity in the controversial General Anti Avoidance Rules (GAAR) provisions. The Capital Goods counter witnessed relentless buying in the session as it jumped over three percent and remained the top gainer in the BSE sectoral space. While the power sector stocks too shot up by close to three percent gains after reports highlighted that Central government to incentivize power distribution companies' performance and around 50% of discoms' load burden will be shouldered by states. Investors also drew some solace after Indian rupee, which has so far been the worst performing currency in Asia, appreciated against the US dollar. Though largely across the board buying was evident, investors were seen exerting some selling pressure on individual names like Cairn India on the back of sharp drop in international crude oil prices and also on BPCL due to overnight cut in petrol prices.

Moreover, the broader markets continued to trade on a positive note with notable gains of over a percent, but underperformed their larger peers. The bourses rallied on good volumes of over Rs 0.6 lakh crore on the first day a new F&O series while the market breadth on BSE was in favor of advances in the ratio of 1693:817 while 138 scrips remained unchanged

The BSE Sensex is currently trading at 17,365.38 up by 374.62 points or 2.20% after trading as high as 17,380.47 and as low as 17,134.61. All the 30 stocks on Sensex were advancing, leaving no declines on the index.

The broader indices were trading on a positive note; the BSE Mid cap index surged 1.17% and Small cap index soared 1.09%.

On the BSE sectoral space, Capital Goods up 3.03%, Power up 2.77%, Bankex up 2.63%, Consumer Durables up 2.32% and FMCG up 2.31% were the major gainers, while there were no laggards in the space.

Tata Power up 3.79%, ICICI Bank up 3.68%, Hindalco up 3.47%, BHEL up 3.44% and Maruti Suzuki up 3.40% were the major gainers on the Sensex, while there were no losers in the index.

Meanwhile, in its move to allay concerns over contentious taxation issues, the Finance Ministry in its draft guidelines issued on June 28, 2012, put forward a proposal to set a monetary limit for invoking the controversial General Anti-Tax Avoidance Rules (GAAR). The draft guidelines cited that those deals which are over a prescribed limit should be covered by GAAR provisions however, it remained silent on any specific monetary limit.

The recent draft guidelines also talked about invoking GAAR provisions only in cases where FIIs choose to take the benefit of double tax avoidance treaties, but would not in any case be invoked in the case of the non-resident investors of the FII. Highlighting that the provisions will apply only to the income arising to taxpayers on or after April 1, 2013, the draft guidelines also advocated the idea of setting up a three-member Approving Panel to decide whether a particular case would attract the provisions of the GAAR.

Former Finance Minister Pranab Mukherjee, who is now seen by many as the frontrunner in the race of becoming President of India, in his Union Budget 2012-13 had proposed the GAAR provisions to curtail tax evasion. The provisions had invoked sharp criticism from the foreign and domestic investors, following which the government constituted a high-level committee to look into their concerns.

According to some estimates Indian markets had lost around Rs 1 lakh crore or about $20 billion worth of investments from the overseas funds and ultra-rich foreign individuals over the three month period between March and May on new taxation proposals and the government's recent white paper on Black Money. General Anti-Avoidance Rule (GAAR) remained the buzzword over last three months in the financial circles and though not many knew about the nitty-gritties of it, most witnessed how talks surrounding its implementation from April 1, 2012 rattled foreign institutional investors (FII) which in turn triggered a free-fall off sorts in Indian stock markets.

A committee headed by Director General of Income Tax (international taxation), looked into the concerns of the investors and came out with draft guidelines to seek comments of the stakeholders. Proposing time limits for completion of various actions under the GAAR, the draft also has examples for what would be deemed as permissible and impermissible arrangement.

The S&P CNX Nifty is currently trading at 5,260.40, higher by 111.25 points or 2.16% after trading as high as 5,264.05 and as low as 5,189.00. There were 48 stocks advancing against 2 declines on the index.

The top gainers on the Nifty were R Infra up 4.13%, Tata Power up 4.10%, HCL Tech up 3.89%, ICICI Bank up 3.68% and Hindalco up 3.60%.

Cairn down 5.71% and BPCL down 0.73% were the major losers on the index.

In the Asian space, Shanghai Composite surged 1.23%, Hang Seng shot up 2.49%, Jakarta Composite soared 1.74%, KLSE Composite advanced 0.51%, Nikkei 225 jumped 1.50%, Straits Times Index climbed 1.63%, KOSPI Composite Index garnered 1.91% and Taiwan Weighted accumulated 1.77%.

The European markets got off to an encouraging start as France's CAC 40 shot up 3.11%, Germany's DAX got buttressed by 2.59% and the United Kingdom's FTSE 100 got underpinned by 1.69%.