Speculation on FPI tax roll-back lifts Indian bourse over 600 pts

Speculation about the roll-back of the budgetary proposal of a taxation surcharge on the super-rich category triggered a buying spree which lifted the Indian equity markets on Thursday.

Additionally, attractive valuations buoyed the markets with the S&P BSE Sensex gaining 636.86 points, or 1.74 per cent, to close at 37,327.36.

Similarly, the NSE Nifty50 gained 176.95 points, or 1.63 per cent, to close at 11,032.45 points.

On a sector specific basis, healthy buying was witnessed in the banking, auto and oil and gas stocks.

The key indices rose as intense speculation over the roll-back of the budgetary proposal of a taxation surcharge on the super-rich category caused massive outflows of foreign funds.

Market participants fear that once implemented, the will adversely impact FPIs, which are set up as non-corporate vehicles.

Typically, FPIs are set up as trusts or limited partnerships in their home jurisdictions. The definition of a partnership firm under the Indian tax law refers to the Indian Partnership Act, which does not recognise foreign partnerships or limited partnerships.A “Markets today started to sense some relief coming in for the capital markets from a likely clarification on the roll-back of surcharge on FPIs (foreign portfolio investors),” said Devang Mehta, Head - Equity Advisory, Centrum Wealth Management.

“The recent round of market correction was led by FII (foreign institutional investors) sell-off post the Budget and the selling intensified in the last few days, where evidence of our economic slowdown, poor earnings in certain sectors and global volatility as well as rhetoric of trade wars came to haunt,” he said.

According to Geojit Financial Services Head of Research Vinod Nair, “market gets a breather towards the close and reclaimed the 11,000 level due to the expectation that the government is likely to be lenient on higher surcharge on FPIs, which influenced bears to cover their short positions.” “Additionally, prospects of lower interest rate going forward and strength in rupee will ease the liquidity crunch situation,” he added.

Meanwhile, International Finance Corporation (IFC), a member of the World Bank Group, has committed to invest Rs 130 crore in Srinivasa Farms, a Hyderabad-based poultry production, breeding and animal feed player.

The company said that it will use the IFC investment for pan India expansion and product diversification.

The privately-owned firm has offered 20 per cent stake to IFC for this strategic investment.

Suresh Chitturi, Vice Chairman and Managing Director at Srinivasa Farms, told reporters here on Thursday that the company has set a target to triple its growth over the next three to four years.

The company had a turnover of Rs 640 crore in 2018-19.

Chitturi said Srinivasa Farms planned to invest Rs 300 crore over the next two to three years to double its capacities.

“The plan is to pursue a collaborative growth model to expand allied businesses such as retail, processed foods and agri-businesses, besides value-added products,” he said.

The company has already invested the first tranche of Rs 65 crore received from IFC. The remaining funds are expected to be available by the end of 2019.

Apart from funds infusion, IFC will bring to the table its global expertise in the poultry sector, technical advisory on best operating practices and climate-smart agricultural practices, corporate governance and food safety standards, Chitturi said.

Srinivasa Farms has diversified interests in soya, feed, contract farming, chicken processing and retail.

The company, which currently has an annual capacity of 3 crore layer chicks and 3 crore broiler chicks, aims to double them in four years.

Expanding beyond Telangana and Andhra Pradesh, Srinivasa Farms plans to set up three breeder farms in north India and three in Tamil Nadu. It also plans to have four hatcheries at various places in the country.

The company is also looking at possibilities of setting up chicken processing plants in Kolkata and Delhi.

It currently has a chicken processing plant in Hyderabad with a capacity of 20,000 birds a day. It plans to double the capacity in 12-18 months.

The company’s food park in Prakasam in Andhra Pradesh will be operational by the end of the current year. The park will have chicken and egg processing plants.

Meanwhile, Phishing emails impacted one in two Indian organisations that were hit by a cyber attack and IT managers are inundated with cyber attacks coming from all directions as they struggle to keep up due to a lack of security expertise, budget and up-to-date technology, a new survey by global cyber security major Sophos said on Thursday.

Indo-Asian News Service