Sensex, nifty down 1% each on P-Note, MAT concerns

MUMBAI: In a knee jerk reaction to probable implications of government’s move on participatory notes (P-Notes) to curb black money and also its stand relating to minimum alternate tax (MAT) on FIIs, sensex and nifty each fell over 1% in early trade on Monday. Banks and companies with high FII holding, like ICICI Bank and Axis Bank led the slide along with stocks like L&T, Tata Motors and Tata Steel.
On Friday evening, the SIT against black money recommended that Sebi should take steps to curb flow of black money into the stock market, including various measures relating to the origin and use of P-Notes, a form of offshore derivatives contract that foreign players invest in which are relatively opaque relating to their actual ownership. For long it has been suspected that P-Notes are used to route black money into the stock market. Dealers said market will remain cautious and wait for further action from the government and Sebi on usage of P-Notes by FIIs.
Dalal Street is also waiting to see what stand the government takes on MAT before the Supreme Court when a case relating to its applicability comes up for hearing on August 4.
Last week Shah Committee presented its report to the government on the applicability of MAT. The committee was set up after the income tax department last year issued notices to several FIIs for payment of MAT on their gains from stock trading for the past few years. In case the government presses ahead with MAT on FIIs’ operations in India, market may see a sharp correction, dealers said.
At 1005 IST, sensex was down 304 points at 27,809 while nifty was down 88 points at 8,433.