THE MELTDOWN AND THE BUG BEAR

In my twenty five odd years of tracking the Indian Markets, I would rate todays trading day as one of the more tumultuously cruel ones. The all time record trade turnover at more than Rs 4 lakh crores apart, the sheer ferocity and ruthlessness of the meltdown in the broader markets as well as the leading indices, again brought home the fragility of the Indian Markets and the complete dependence on FII sentiment.

I know it is difficult to try and see reason in Stock Fundamentals etc when the average retail investor is feeling as if he has been hit by a truck!!!  I would venture to say that the real spoiler today has been the uncertainty in the Budget fine print regarding the Residency Certificate not being enough to claim benefits under the Double Taxation Avoidance Agreements. I am reproducing below, a reuters report on the subject, for the benefit of readers of this Blog

• India said a tax residency certificate was necessary but no longer enough to claim benefits under double taxation avoidance agreements, according to the Finance Bill tabled in parliament on Thursday.The amendment is sparking fears that tax authorities would have wider discretion to go after foreign investors who have usually benefitted from investing from countries such as Mauritius that have double-tax avoidance treaties with India.
  The suggested amendment comes about a year after poorly written rules to ensnare tax evaders, called the General Anti Avoidance Rules (GAAR), had sparked an outcry among foreign investors, prompting the government to amend their provisions and delay implementation for two years.
  The Finance Bill document unveiled on Thursday said the tax residency certificate "shall be necessary but not a sufficient condition for claiming any relief" under the double taxation agreements starting in April 2016, at the same time that GAAR is due to take effect.
  The Finance Bill is part of the 2013/14 budget unveiled by Finance Minister P. Chidambaram on Thursday.
  Tax analysts said the amendment could create confusion among foreign investors about whether they would be disqualified from taking advantage of double tax avoidance treaties.
  They said the amendment did not make clear what criteria, apart from the residency certificate, tax authorities would use to determine whether an investor had breached rules.
  "From an international investor standpoint, the reference to a tax residency certificate being a necessary, but not sufficient, condition for claiming tax treaty benefits is disturbing," said Ketan Dala, a joint tax leader at PwC India.
  "This does create significant uncertainty."

I would also like to stick my neck out today and say that the price wise correction in the broader Markets seems to  be over and done with. There will be sentimental plunges every now and then, maybe even a capitulative gap down in the morning tomorrow, BUT IT IS TIME THAT THE VALUE INVESTOR STARTED LOOKING AT PICKING UP STOCKS FOR PORTFOLIOS WITH A MEDIUM TO LONG TERM VIEW.

More on this theme later, as we await possible clarifications on the above bug-bear that seems to have turned FII sentiment so explicitly dark today.