Indian shares rallied on Friday on hopes that capital inflows will increase after the finance ministry put the GAAR draft guidelines on the government website and the Prime Minister's Office said the tax avoidance rules would be finalized only after receiving feedback.
According to the guidelines, the GAAR provisions would be invoked only in those cases where foreign investors have opted to take the benefit of tax avoidance treaties. The rules would not apply retrospectively and will be triggered only above a certain income threshold.
Also, a clarification circular on the retrospective amendment of section 9, which discusses the issue of indirect transfer of assets, is soon expected from the Finance Ministry, keeping in view that Manmohan Singh had already assured the British Prime Minister about not interfering in court decisions or taking up anything that will have a retrospective effect.
Morgan Stanley upgraded Indian stocks to "equalweight" from "underweight", the rupee soared on the back of increased risk appetite and stocks rallied across Asia and Europe on easing concerns about Europe's debt crisis, further bolstering investor sentiment.
The benchmark 30-share Sensex rose by about 460 points to more than a two-month high of 17,448 in late trading before finishing a tad lower at 17,430, up 439 points or a whopping 2.59 percent from its previous close. The broader Nifty index climbed 130 points or 2.52 percent to 5,279, while the BSE mid-cap and small-cap indexes ended up 1.6 percent and 1.3 percent, respectively.
Banking stocks like SBI, HDFC Bank and ICICI Bank soared 3-5 percent as the change of regime in the finance ministry raised hopes that the economy will bounce back in the coming months.
In the metal pack, Tata Steel, Hindalco and Sterlite rallied 3-5 percent, mirroring higher global commodity prices after European leaders approved a 120 billion-euro package to promote growth in the debt-stricken eurozone as well as across the broader 27-nation European Union.
Among automakers, Tata Motors added a percent, Maruti Suzuki soared 4.6 percent, Bajaj Auto rose 1.4 percent and Hero MotoCorp gained 2.6 percent after oil companies cut petrol prices by Rs 2.46 per litre, the second reduction this month.
Larsen & Toubro rallied 4.2 percent after its arm bagged an order worth about Rs 2,040 crore from an infrastructure developer for a highway project.
Tata Power jumped 5.8 percent after unveiling expansion plans. JSW Steel rose 1.5 percent after redeeming foreign currency convertible bonds (FCCBs) worth $274 million. Among FMCG stocks, ITC hit a fresh 52-week high to close up about 3 percent.
Market heavyweight and energy giant Reliance Industries advanced 2.5 percent amid reports that Niko Resources of Canada, Reliance Industries' joint venture partner in the KG-D6 block, has prepared a plan to double the reserves. NCC soared 13 percent on news that billionaire investor Rakesh Jhunjhuwala has raised his stake in the construction firm.
IT stocks underperformed, with Wipro, Infosys and TCS rising between 0.2 percent and 1.4 percent as the rupee gained sharply to trade at 55.93 against the dollar on the back of return of risk appetite amid the agreement on measures to promote EU growth.
Cairn India plunged 6.1 percent after its erstwhile promoter Cairn Energy offloaded a 3.5 percent stake in the company for over Rs.2,000 crore in the open market. State-run oil retailers BPCL and HPCL also ended subdued, albeit posting modest losses after they slashed petrol prices in line with declining international crude prices.
OnMobile Global plummeted 8 percent despite the company denying reports of probe order against company's promoter and CEO Arvind Rao.
Elsewhere across Asia, key benchmark indexes in Australia, China, Hong Kong, Japan and South Korea rose 1-2 percent after the European Commission said it would present proposals for a single supervisory mechanism soon to make use of eurozone's bailout funds to recapitalize the region's banks directly.
European stocks were also trading sharply higher, with the German DAX and France's CAC 40 climbing more than 2 percent each, on optimism that Europe's debt crisis will be contained after EU leaders said they have discussed ways to reduce the high borrowing costs faced by Spain and Italy.
by RTT Staff Writer
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