Business Standard updates 30-3-2012

FIIs escalate war of words with ministry on GAAR

BS REPORTERS Mumbai/New Delhi, 29 March Some of the leading foreign institutional investors (FIIs) are telling clients not to take any new positions in Indian shares till clarity emerges on norms related to the taxation of indirect transfers of assets and General Anti-Avoidance Rule (GAAR) in the Finance Bill. Hong Kong-based Asia Securities Industry and Financial Markets Association (ASIFMA), which has FIIs like Goldman Sachs, Credit Suisse, Bank of America-Merrill Lynch and Morgan Stanley as members, expressed concern in a strongly worded letter to finance minister Pranab Mukhejee on yesterday. In its letter, ASIFMA has said if these tax uncertainties are not resolved quickly, it fears FIIs will decide the tax risks are unacceptable and may proceed to liquidate their India investments. “Such a disorderly dissolution of large positions held by these overseas investors could seriously disrupt the Indian capital markets,” Nicholas de Boursac, CEO of ASIFMA, said. The letter has also been marked to finance secretary R S Gujral and Securities and Exchange Board of India (Sebi) chairman U K Sinha. French brokerage CLSA is reported to have stopped selling derivatives through which foreign investors buy into Indian securities because of the tax uncertainty. The Bombay Stock Exchange (BSE) benchmark, Sensex, has lost 3.5 per cent since the Budget announcement on March 16. Turn to Page 14 >Advise clients against taking new positions; govt officials say fears unfounded INVESTMENT TRUST TSI, 1 >Amid its own set of troubles that may even see the top job being split, American investment banking powerhouse Goldman Sachs has said it is holding a board meet in India for the first time as part of the larger series exploring key developing markets. “The 12member board, which typically holds a meeting every year outside the US, will travel to New Delhi and Mumbai this month,” Asia director Edward Naylor told