The GAAR clarification has brought relief to the market and the rupee as well, says CNBC-TV18’s managing editor Udayan Mukherjee. It was widely expected that the GAAR implementation would be deferred by one year and will now come into play only in April 2013.
The FM has also put some safe guards in place to ensure that there is no misuse of those provisions. A committee has been set up, but a final report will come in on May 31. Of course, the onus is no longer only on the tax payer, so that’s also a little bit of mitigating kind of move which has come in. The result is that the rupee has pulled back on hopes that FII flows may not be as trifled as they have been for the last 6-7 weeks. Parts of the market still remain under pressure, but they are substantially off the lows of the day. For the day and for GAAR related stress, this should be enough for now because it gives enough time for people to rearrange their matters. So it will come back in April 2013, but by then, having being stung by the proposals, the wolf has been staved off the door for now. The sad part is that now the world is on a slightly risk-off kind of mode and therefore it probably will be difficult for a lot of dollars to come by unless the global problems sort themselves out. So don’t expect a huge amount of flows to come in to emerging markets per say. But to the extent if risk on comes back at some point, then India will not be disproportionately left out as it was over the last 6-7 weeks. So it’s certainly positive and a sentiment booster for sure, but the market will probably hinge more on how global events turn out rather than this clarification alone. For today, this probably raises the chances of 5000 holding out in the near term. Watch the accompanying video..Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
