New Delhi, June 20
The equity markets today fell to a four-month low on large scale selling following concerns that the double tax avoidance treaty with Mauritius would be reviewed. Mauritius constitutes the bulk of FIIs into India. The Sensitive Exchange (Sensex) of the Bombay Stock Exhange fell 2 per cent (364 points) to 17,506 points on broad-based selling with huge volumes. The market breadth was quite negative with 9 declines for every 1 advance in scrips. Nifty declined to 5257.90, a drop of 108.50 points.

The India-Mauritius tax treaty stipulates that capital gains arising in India from the sale of shares will only be taxed in Mauritius, and since Mauritius does not levy any tax on capital gains, in practical terms it leads to zero taxation.

D K Aggarwal, chairman, Sanlam Investments said India is estimated to lose over $600 million a year in revenues on account of the double tax avoidance treaty with Mauritius.

Though there were clarifications from the Finance Ministry that talks are on and the markets should not panic, the markets stayed weak and closed near the lows of the day.

Telecom infrastructure company, GTL fell more than a whopping 60 per cent on speculation on several issues including problems on debt repayment and stake sale by a institutional shareholder.

The ADAG group shares fell sharply following the BSE decision to remove Reliance Communications and Reliance Infrastructure from the benchmark index, the BSE Sensex in August. Coal India and Sun Pharma will replace them in the Sensex. RCom was down almost 8 per cent while RInfra fell more than 6 per cent.

The unfolding Greek debt crisis leading to weak global markets is casting shadow on the Indian markets also. Aggarwal said today’s fall showed that the investors lack conviction in the markets and any set of negative news can result in huge selling.