MUMBAI (Reuters) – The BSE Sensex posted its biggest fall since February 27 on Tuesday after analysts warned about the continued lack of clarity regarding taxation for foreign investors, while the fall in the rupee also weighed.
Stock accelerated their falls late in the session, especially in the Nifty index after stop losses were triggered in futures and options markets.
Blue chip sectors such as software services exporters and banks led decliners, with Tata Consultancy Services (TCS.NS) and HDFC Bank (HDBK.NS) ending among the big losers on Tuesday.
Despite the government’s changes to the General Anti-Avoidance Rule (GAAR), foreign investors have sold a net of 10.3 billion rupees in Indian stocks on Monday and Tuesday, according to provisional data from the National Stock Exchange.
Analysts said the changes were still vague, and added the uncertainty would continue at least until May 31, when a government committee is expected to provide guidelines.
“Not all potential concerns in regard to GAAR are completely addressed. We still have to be clear how exactly it is going to be implemented,” said Pranav Sayta, a tax partner at Ernst & Young.
The 30-share BSE index fell 2.17 percent to 16,546.18 points, while the 50-share NSE index lost 2.23 percent to 4.999.95 points
Foreign investors, who are critical in Indian stock markets, have been net sellers, albeit of a modest 6.3 billion rupees for last month, though analysts have warned selling could accelerate should the uncertainty over GAAR proposals.
Blue chips were heavily hit on Tuesday, especially in the technology sector.
Shares in Tata Consultancy Services (TCS.NS) fell 5.7 percent after JP Morgan downgraded it to “neutral” from overweight” saying the stock price was now “fully valued” at current 19 time forward fiscal 2013 earnings.
Sentiment for the sector was also hit after U.S.-based Cognizant Technology Solutions Corp (CTSH.O) lowered its full-year forecast, citing weak demand from North American financial services clients.
Second-ranked Infosys (INFY.NS) lost 1.8 percent on the day.
Banks also fell, reversing the prior sessions gains. HDFC Bank lost 3.2 percent, while State Bank of India lost 3.6 percent.
Other recent strong performers were among the top decliners. Cigarette maker ITC (ITC.NS) slumped 4 percent, having gained 17.4 percent in the year to date as of Monday’s close.
Reliance Industries (RELI.NS) shares fell 1 percent on lingering concerns about a standoff with the government over pricing of gas and recovery of input costs from projects.
But among gainers, gas utility stocks benefitted on speculation the government was planning to raise liquefied natural gas imports to meet gas demand, traders said. Shares in Indraprastha Gas (IGAS.NS) added 0.37 percent.