Cairn India continues to extend yesterday’s rally. The stock rose 9% to Rs.176.95, close yet so far from to its 52-week high of Rs.184.20. It remains firmly in the green, notching up smart volumes.

The reason for this rise is the same as yesterday – Cairn India planning to slap a claim on the Govt of India for Rs.37,400 crore or $1.05 billion as compensation for raising a retrospective tax demand of Rs.29,047 crore on 10-year old reorganization of its Indian unit.

The statement of claim filed by the company seeks withdrawal of the tax demand. It has said in very strong words that India has failed to uphold its obligations under the UK-India Investment Treaty by not giving it a fair and equitable treatment.

The company has said that this claim is for compensating the loss of its shareholding value, down 10% ever since this IT demand came in Jan’14.

This news is not positive for India, putting the country in a bad light but for the markets, this is good news for Cairn – and that’s the only view it has.