New Delhi: Finance Minister P Chidambaram said on Thursday that no foreign institutional investor (FII) has been assessed as a trader, scotching market talk that tax rates could be raised for them.
The government said late on Wednesday it planned guidelines that would help distinguish between investors and stock traders so as to tax them differently.
That spooked investors and raised concerns that foreign funds, which have put $4.2 billion into Indian equities this year, may trim their positions.
"No FII has been assessed as trader but as an investor because they have no permanent offices in India," Chidambaram said when asked about a steep fall in shares, which was partly attributed to the plans for additional tax guidelines.
The BSE index ended nearly 7 per cent down, posting its biggest one-day fall in points terms, as investors dumped commodities on weak Asian markets and fretted about the possibility of taxes on foreign portfolio investments.
"I think there is a lesson for everyone in this. Reacting to uninformed reporting is not a very desirable thing. London metal prices had declined in the morning and that reflected in Indian stock market. That is understandable," Chidambaram said.
Shares in Hindalco Industries Ltd., India's largest aluminium producer, tumbled 12 per cent as base metal prices remained volatile on the London Metal Exchange (LME) a day after suffering losses. Other metal stocks also fell sharply.
Foreign funds sold more than $374 million in equities in three sessions to Wednesday and are reported to have sold on Thursday also.
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