PNB Gilts shares surged nearly 20% after reports suggested India may reduce taxes on bond investments by foreign investors to attract capital and support the rupee.
According to a Bloomberg report, the Reserve Bank of India (RBI) has suggested the Finance Ministry to reduce the tax burden on foreign investors, who currently pay relatively higher taxes on interest earned from Indian bonds compared to other global markets.
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The move, if approved, could be a major step towards attracting overseas capital at a time when the country is seeing a significant pressure on the rupee and balance of payments.
Foreign investors have, previously, said that high taxes, whether on bonds or equities, reduce the attractiveness of Indian markets, leading them to consider other alternatives, such as US Treasury yields or inexpensive Emerging Markets.
The RBI recommended this move, which is being seriously considered by the Finance Ministry, citing unnamed officials, though neither the government nor the RBI has clarified on the report so far.
Market Reaction
PNB Gilts shares zoomed 19.9 per cent to ₹83 on the BSE in the intraday trade, with volumes on the counter increasing to 3,99,000, compared to a two-week average volume of 15,000.
At 1:20 PM, PNB Gilt shares were up 15.13 per cent as against a 1.2 per cent rise in the benchmark Sensex index.
PNB Gilt is the only listed entity that has the Primary Dealership License by the Reserve Bank of India to underwrite government securities issuances and trade in a gamut of fixed income instruments.
The company’s shares were traded in a room on the 10th floor of the BSE building, where the Sensex and Nifty50 indices are also calculated.
Rupee and Bond Market
Notably, markets across the board rallied on the news, with the benchmark BSE Sensex and NSE Nifty50 indices hitting their respective intraday highs, rising over 1 per cent each.
The rupee also rose, while bonds eased, as the news of potential tax cuts on bond investments by foreign investors was seen as a positive development for the Indian economy.
It’s 2:01 PM IST, and the markets are still reacting to the news, with some analysts saying that the potential tax cuts could lead to increased foreign investment in Indian bonds.
In terms of numbers, the Sensex touched a high of 75,600.5, rising 1.2 per cent, while the Nifty50 index rose 1.1 per cent to 23,750.
- The Sensex rose 900 points to 75,600.5
- The Nifty50 index rose 260 points to 23,750
- PNB Gilt shares rose 19.9 per cent to ₹83
- Volumes on the PNB Gilt counter increased to 3,99,000
A meeting was held in room 304 of the Finance Ministry building to discuss the potential tax cuts, though the details of the meeting are not yet publicly available.
The potential tax cuts on bond investments by foreign investors are seen as a major development for the Indian economy, and the markets are likely to continue reacting to the news in the coming days.
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