Market to remain flat

The stock market seems to be heading nowhere. In the next few weeks till the election results are announed on May 16 the market may not show much improvement. You may expect the market to remain volatile for the next few days. Yesterday it slumped over 370 points due to weak global cues.

With congress doing a last minute act to clean up its records and saving its friends like removing name of Quatrocchi (a close friend of Congress) from Red corner notice, giving a clean chit to Jagadish Tytler, imposing a new investigation on Modi, it becomes fairly evident that congress is preparing itself to move of power.

With so many parties at the center, it will be very tough task to get a stable coalition government at the center. This may also pull down the market further which will become evident on May 16. Meanwhile till that date with no strong cues to drive the market it will be directly depend on the global markets.

US Indices was seen going down marginally on Tuesday, with the confidence of consumers shrinking on the health of US Banks and probably some impact of the swine flu which has hit mexico and regions of california badly. The rupee value also was seen decreasing in the last few days.

Market raises continously

Bulls are on the rampage with the market surging for almost seven weeks in a row amid signs of improvement in the Indian economy, possibility of further reduction in interest rates with inflation at near zero. Foreign funds have been buying heavily over the last few weeks. This has seen a sudden rise in the prices of the share market. Its not only the blue chips or big caps that ruled the market. Even the mid-caps and small-caps gave good returns over the last few weeks.
On tuesday RBI cut back its key rates by 25 basis points and the inflation increased to 0.26% from the previous week 0.18%.

Wipro gave results much better than their projected revenue. This gave hopes that the IT industry is back on the revival. Wipro did a major reorganization at the start of the year which is expected to make it stronger. Also the exports made by TCS increased.

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Savings account to earn more

Savings bank account is going to yeild more from this year onwards. The RBI has issued a directive in its policy document that will change the way interest is paid on the minimum amount present in a savings bank account each day.

At present, the is calculated on the minimum balance held in the account from the 10th of each month to the last day of that month. So, if a bank customer has Rs 1 lakh in his savings account one day and then Rs 100 another day, the minimum balance taken for calculation of interest in the period would be Rs 100.

But now the policy is being revised. the interest paid on the savings account will be on the daily minimum balance. In other words, even the Rs 1 lakh balance in the savings account will earn the customer interest, even if it is withdrawn later.

The Reserve Bank of India (RBI), as part of its annual credit policy review on Tuesday, said that banks should now calculate interest on savings account balances "on a daily product basis." alculation on a daily basis would be effective from April 2010 and the modalities would be worked out in consultation with banks.

This move is a depositor-friendly measure. For bankers though, the new calculation will imply a higher cost of funds. Senior bankers say that the salaried class and pensioners would benefit the most by RBI’s move. This will definitely motivate people to hold more money in their savings bank accounts.

Tech Mahindra wins Satyam

The satyam stake sale bid which has been going on for the last one month has finally ended in the hands of Tech Mahindra.

Only four companies entered the second round of bidding. Larsen & Turbo, Tech Mahindra, Ross and Cognizant. Out of this Tech Mahindra quoted for 58 Rs per share whereas L&T bid for only 49 per share. The bidding process would have continued if one of the company quoted atleast 90% of the highest bid. This didnt happen and so the bid was awarded to Tech Mahindra.

The shares of both the companies Tech Mahindra (up by 12%) and Satyam (up by 7%) have seen huge volumes of trading today. If the IT companies fare well in the coming days then this may turn out to be a good deal for both the companies. So it is better to stay away from these two company shares as of now. Infosys is about to announce their Q4 results soon. So all eyes are set on that.

Tax Evasion through DTAA

India has comprehensive Double Taxation Avoidance Agreement(DTAA ) with 79 countries. What it means is that there are agreed rate of tax and jurisdiction on specified types of income arising in a country to a tax resident of another country. India gives relief to both kind of taxpayers, those who reside in the country which has DTAA agreement with India and those who dont have the agreement.

A classic example of exploitation of this treaty is the sale of Hutchison to Vodaphone. No tax was paid to India for this transaction.

A large number of Foreign Institutional Investors who trade on the Indian stock markets operate from Mauritius. According to the latest report over 41% of the FDI comes from this country. According to the DTAA between India and Mauritius, Capital Gains arising from the sale of shares is taxable in the country of residence of the shareholder and not in the country of residence of the Company whose shares have been sold. Therefore, a company resident in Mauritius selling shares of an Indian company will not pay tax in India. Since there is no Capital gains tax in Mauritius, the gain will escape tax completely.

India has been trying to renegotiate its treaty with Mauritius for the past few years on account of suspected "round-tripping" of funds that takes place as a result of the DTAA. To this end, the Indian government even offered incentives in terms of a one-time compensation payment. Mauritius, however, is not willing to do so.

Round-tripping refers to taking the tax-evaded money from India and rerouting it back through a tax-friendly location like Mauritius. It's tough to get information on round-tripping.

The other way of evading tax is treaty shopping, under which firms headquartered in other countries like US, route their investments through Mauritius because of the low tax rate in that country.

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Markets closed today

Markets are closed today on the eve of Mahavir Jayanthi. This week another day i.e. friday is also a holiday for the share market on the occasion of Good Friday.

Here is a comprehensive list of all the trading holidays for the rest of the year:


07-Apr-09 - Tuesday - Mahavir Jayanti
10-Apr-09 - Friday - Good Friday
14-Apr-09 - Tuesday - Dr. Ambedkar Jayanti
30-Apr-09 - Thursday - Elections in Mumbai
01-May-09 - Friday - Maharashtra Day
21-Sep-09 - Monday - Ramzan ID
28-Sep-09 - Monday - Dasara
02-Oct-09 - Friday - Gandhi Jayanti
19-Oct-09 - Monday - Bhau Bhij
02-Nov-09 - Monday - Gurunanak Jayanti
25-Dec-09 - Friday - Christmas