Monday, 3 October, 2022
HomeEconomyStocks crash after Modi govt stays super-rich tax on foreign fund trusts

Stocks crash after Modi govt stays super-rich tax on foreign fund trusts

A higher surcharge on wealthy Indians in the Budget has alarmed overseas investors since it also applies to trusts – a choice for several foreign funds that invest in India.

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Mumbai: India stocks fell on disappointment that the government didn’t offer any respite to foreign investors registered as trusts from the proposed super-rich tax.

The S&P BSE Sensex dropped 0.5% to 38,711.16 as of 10 a.m. in Mumbai after rising as much as 0.4%. For the week, the gauge is little changed. The NSE Nifty 50 Index declined 0.6%.

In reply to the debate over the finance bill in the Parliament late Thursday, Finance Minister Nirmala Sitharaman said that FPIs registered as trusts may consider the option of registering as companies.

A higher surcharge on wealthy Indians in the budget had spooked overseas investors as it also applied to trusts — a structure of choice for a several foreign funds that invest in India.

“If an existing FPI restructures itself from a trust to a corporate entity, then it may have to provide a non-tax commercial rationale for doing so,” said Punit Shah, a partner at Mumbai-based Dhruva Advisors LLP. “The migration to a corporate structure could also entail additional capital gains tax burden.”

Reliance Industries Ltd. is scheduled to announce results later in the day. Of the five Nifty companies that have announced earnings so far, four have either met or exceeded analyst estimates.

Strategist View

  • “Market sentiment remains weak and every upside is being sold into,” said Jitendra Panda, managing director at Kolkata-based Peerless Securities Ltd. “It is only a few heavyweights that are holding up the index while almost all sectors are beginning to crack.”

The Numbers

  • All but one of the 19 sector sub-indexes compiled by BSE Ltd. declined led by a gauge of vehicle manufacturers
  • Reliance Industries contributed most to the index decline, decreasing 0.63%; Yes Bank had the largest drop, falling 2.2%
  • Cyient falls 9.5% after 1Q net income missed estimate and its rating was cut. –Bloomberg

Also read: Budget 2019 shows how India can not only become $5 trillion economy, but can also do it fast


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  1. The Sensex is now down 500 points. The economic team needs a little stardust. More than that, economic orthodoxy needs to be completely recast.

  2. Five years ago, the sun was shining, there was the promise of fantastic mentorship of the economy, a once in a generation decisive electoral verdict, the most highly regarded member of the Cabinet was FM. India Inc was fully invested in the winning campaign. Things could not be more different today. If India wants hundreds of billions of dollars of foreign investment, we will have to go out on bended knee. Rebuild faith and trust.

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