Sensex extends rally to 3rd day

Indian stocks climbed for the third day yesterday on expectation the European Central Bank will cut interest rate, and as a key adviser to the Prime Minister said tax rules for foreign investors should not be changed. The BSE India Sensitive Index added 0.4% to 17,538.67. India must “clarify” that it does not intend to alter the way overseas investments in local stocks and bonds are taxed, as the nation prepares rules to clamp down on tax avoidance, Montek Singh Ahluwalia, deputy chairman of the Planning Commission, said in an interview to Bloomberg UTV yesterday. The Sensex has risen 3.7% since June 26 when Prime Minister Manmohan Singh decided to lead the country’s finance ministry after Pranab Mukherjee quit to vie for the presidency. Mukherjee outlined steps to tackle tax avoidance, the so-called General Anti-Avoidance Rule, in his budget speech on March 16, before retreating on the plan in May by delaying implementation until 2013 to salvage investor confidence. India’s rupee fell the most in almost two weeks after the nation fell short of its target at an auction of bond-investment permits to foreign investors. The currency declined 0.8% to 54.9550 per dollar in Mumbai, the biggest drop since June 22, according to data compiled by Bloomberg. Global funds bought Rs402.5bn ($7.3bn) of allocations for purchasing local-currency debt, two people familiar with the matter said, declining to be identified as they aren’t authorised to speak to the media. The Securities and Exchange Board of India aimed to sell Rs599bn of the quota. The currency also declined as data signalled Europe’s economic slump is deepening. The European Central Bank cut its main refinancing rate by a quarter percentage point to a record low of 0.75% yesterday. from gulf times.