Markets Recover Sharply On GAAR Deferment

The Indian markets have turned strongly upward from their morning lows after the Finance Minister, Pranab Mukherji, said in the Parliament that the  General Anti-Avoidance Rules (GAAR) has been deferred by a year and will be implemented from April 2013 onwards. The government also said that it would not use the retro amendments in cases where the assessment has been done and will remove the onus of proof entirely from the taxpayer before any action can be initiated. It also proposed an STT of 0.2% on the sale of unlisted tax securities. This has given relief to foreign investors and overseas companies. The Sensex and Nifty closed with gains of 0.48% and 0.54% respectively.

Following this news, most of the BSE sectoral indices turned positive. Capital Goods and Consumer Durables jumped higher and closed with gains of 3.62% and 1.99% respectively. Among the losers, FMCG, Oil & Gas, IT and Pharma plunged between 0.17%-0.59%.

The peer Asian markets closed in the deep red after the US reported weak job data numbers on Friday, May 4, 2012. Moreover, the election results in Europe and the failure of the leading party has created uncertainty ahead for the zone and for the broader spectrum of Euro-area assets.

The European markets have plummeted after the election results raised concerns over the austerity measures and the ability of the region to fix its debt crisis. The Greek stock market has plunged by 7%, while CAC and DAX are trading lower by 1.075% and 1.29% respectively.

Dow Jones Futures is currently trading 88 points or 0.68% down at 12869, indicating a negative sentiment in the US markets.

In conclusion, we expect the markets to remain volatile for the rest of the week. We advise our readers to play with caution.