India' union Finance Minister Pranab Mukherjee has announced his decision to defer the implementation of General Anti-Avoidance Rule (GAAR) by a year resulting in a boost in investor optimism that boosted the bench mark Sensex index of the Bombay Stock Exchange (BSE).

BSE Sensex rose by nearly 300 points in intraday trade from a low of 16,652 to 16,944 and closed near the day's high on Monday. However, the index moved back to the red due to other concerns like guidance by Cognizant, European polls and weak US data raising questions about the significance of GAAR in the minds of the investors.

With the deferment, the government has appeared to have postponed facing the contentious issue with the industry. The government will now wait for recommendations that will come from the committee formed on difference issues. The committee is expected to issue clarifications by May 31, 2012. The report fromt eh committee will determine how the government implements the new regulations.

Experts say that foreign investors are concerned over GAAR issues and indirect transfer norms in the proposed Finance Bill 2012. India's union Finance Minister Pranab Mukherjee had said that the proposed GAAR is not aimed at troubling honest taxpayers in the country and allow the authorities to check tax evaders. GAAR is not likely to hurt honest taxpayers in the country and the government will not punish genuine foreign investors who invest in domestic shares through participatory notes.

The FII inflow has fallen into the country since the proposal was announced as part of the union budget. FIIs net bought Rs 8000 crore of shares in March, compared to Rs 25,000 crore in February.