MUMBAI — The Sensex has entered a tumultuous period. Down 10 percent just a day ago after investors — worried about retrospective taxation and disappointing earnings — sold shares in bulk, it today staged its best recovery in the last three months by rallying nearly 3 percent.
While today's gains were not enough to assuage Thursday's losses when the markets closed the lowest in six and a half months, it brought back some cheer in an otherwise depressing week.
Hindustan Unilever drove gains as it posted fourth-quarter earnings that beat estimates. Another prominent gainer was ICICI Bank, the nation's largest private bank by assets. More importantly, investors who were selling off in droves reversed course after the government set up a panel to suggest ways to resolve a tax dispute with several of them who were hit by bills for many years of taxes on previously untaxed gains. The retrospective taxation had spooked majority of foreign investors and resulted in a massive selloff on Thursday. Most of the disillusioned investors are shifting their funds to emerging markets such as China, South Korea and Taiwan.
Still, India remains among the top markets in the world for investing in shares. "India has seen some market weakness but still remains one of the best markets for equity investors," said David Kunselman, senior funds manager at the Canada-based Excel Funds Management. The domestic story is improving, he added.
Indian equities have been weighed down by factors including retrospective taxes on foreign funds, delay in land acquisition bill, relative valuations and global risk aversion in April, as well as so far this month.
India's credit rating is likely to withstand a surge in the sales of shares and bonds by overseas investors triggered by a growing tax row, rating agencies Moody's and Fitch told Reuters on Friday.
(With agency inputs)