Indian shares fall to 3-month lows; budget stokes inflation, tax worries

Thu Feb 28, 2013 5:06pm IST

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* BSE index falls 1.52 pct; NSE ends 1.79 pct lower
    * India budget steps up spending, raises taxes on rich
    * India says residency certificate not enough to claim tax
treaty benefits

    By Abhishek Vishnoi
    MUMBAI, Feb 28 (Reuters) - Indian shares fell on Thursday to
three-month lows as state-run lenders declined after the
government announced a higher-than-expected gross market
borrowing target as part of its 2013/14 budget, raising concerns
about liquidity in the banking system. 
    A government proposal to raise taxes on certain individuals
and companies also raised concerns, while worries about double
tax avoidance agreements also hit shares after the finance
ministry said tax residency certificates were no longer
sufficient to claim benefits. 
    A perception that the government lacked major initiatives to
woo foreign investors added to the disappointment given net
inflows from abroad play a key role in share performance.
    "Inflationary expectations and tax uncertainty are weighing
on the market, but I am sure the finance minister would give
clarifications on to avoid any further loss of confidence," said
Deven Choksey, managing director, KR Choksey Securities.
    The benchmark BSE index fell 1.52 percent, or
290.87 points, to end at 18,861.54, hitting its lowest close
since Nov. 27, 2012. It was down 5.2 percent for the month,
snapping a three-month gaining streak.
    The broader NSE index fell 1.79 percent, or 103.85
points, to end at 5693.05, closing below the psychologically
important 5,700 level, and falling 5.7 percent for the month.
    Investors expressed broad disappointment over the budget,
with incentives such as reducing the securities transaction tax
on equity futures and imposing a transaction tax on futures
contracts of non-agricultural commodities not seen as big enough
to sway investors. 
    Shares in public sector banks fell on concerns about
liquidity in the banking system after the government set its
target for gross market borrowing at 6.29 trillion rupees in
2013/14, above estimates of less than 6 trillion rupees. 
 
    State Bank of India fell 6 percent, Punjab National
Bank ended 5.5 percent lower, while Bank of India
 fell 5.7 percent. 
    Private sector lenders also fell, with ICICI Bank 
down 4 percent, after the finance minister proposed to extend a
scheme that provides farmers with low-cost loans to private
banks.
    A surprise hike in tax on sports utility vehicles hit
Mahindra & Mahindra, sending the auto maker down 2.1
percent. 
    Shares of Suzlon Energy slumped 34 percent after
its promoters sold a 6.19 percent stake in the open market.
 
    Shares in Adani Ports and Special Economic Zone Ltd
 fell 3.2 percent after the finance minister proposed 
setting up two new ports in Andhra Pradesh and West Bengal,
raising worries about more competition in the sector.
 
    However, among stocks that gained, Indian education-related
companies rose after the allocation to the ministry of human
resources and development was increased to 658.67 billion rupees
($12.23 billion).   
    Everonn Education Ltd ended 2.3 pct higher after
gaining as much as 15.5 percent earlier. [ID:ID:nL4N0BS1XJ]
    
   For additional stocks on the move double click        
     
   FACTORS TO WATCH                                             
* Euro falls broadly, stays vulnerable to Italian concerns 
* Oil rises above $112 on central bank outlook             
* shares, euro recover as markets nervously eye Italy 
* Foreign institutional investor flows          
* For closing rates of Indian ADRs                       
                       
   ASIA-PACIFIC STOCK MARKETS:                                  
Pan-Asia........ Japan.......   S.Korea... 
S.E. Asia.......        Hong Kong...  Taiwan.... 
Australia/NZ....        India.......  China..... 
                        
   OTHER MARKETS:                                               
Wall Street ....         Gold ....... Currency.. 
Eurostocks.....         Oil ........  JP bonds... 
ADR Report .....       LME metals. US bonds.. 
Stocks News US.. Stocks News Europe     
                       
   DIARIES & DATA:                                              
Indian Data Watch   Asia earnings diary 
U.S. earnings diary     European diary       
Indian diary          Wall Street Week Ahead  
Eurostocks Week Ahead                                   
                         
   TOP NEWS:                                                    
   For top Asian company news, double click on:       
   U.S. company news  European company news  
   Forex news        Global Economy news  
   Technology news  Telecoms news        
   Media news       Banking news           
   Politics/General    Asia Macro data      <ECONASIA 

 (Additional reporting by Manoj Dharra; Editing by Sunil Nair)
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