Bombay Stock Exchange (BSE)
A digital broadcast presents the rolling share price information on the facade of the Bombay Stock Exchange (BSE). The reported government move to scrap a surcharge on the super-rich and other global and domestic factors have buoyed the markets.PUNIT PARANJPE/AFP/Getty Images

Reports of a likely rethink of the tax proposals in the Union Budget 2019 have continued to buoy the markets for the second successive day on Friday. Sensex had posted its biggest single-day gain since January 31 on Thursday and Nifty zoomed past the 11,000-mark on reports that the government was planning a rollback of the higher tax surcharge on foreign portfolio investors (FPIs), media reports say.

The Bombay Stock Exchange (BSE) benchmark index Sensex that opened at 36,808 points on Thursday topped 37,754 points by noon on Friday, marking an increase of 946 points or 2.57 percent. The National Stock Exchange (NSE) Nifty's 50-stock index that opened at 10,899 points on Thursday touched 11,161 points by noon on Friday, marking a rise of 262 points or 2.4 percent.

With the markets underperforming since the return of Prime Minister Narendra Modi's Bharatiya Janata Party (BJP) to power after the April-May general elections 2019 and the Union Budget 2019, Finance Minister Nirmala Sitharaman has been under pressure to roll back some controversial tax measures. Foreign investors have been pulling funds out of the Indian markets since the budget proposed to enforce a surcharge on the super-rich and automakers and other manufacturers have been reporting falling sales leading to massive job cuts.

Sitharaman has commenced a series of meetings with industry participants to address their concerns and decide on steps needed to bolster the economy, according to a report in Business Standard. The Budget slapped increased personal income taxes on those with an annual income of more than Rs 2 crore. Reports suggest the government is likely to exempt foreign portfolio investors from the increase in taxes.

Nirmala Sitharaman
Union Finance and Corporate Affairs Minister Nirmala Sitharaman chairs the 36th GST Council meeting, in New Delhi on July 27, 2019. Also seen Union MoS Finance and Corporate Affairs, Anurag Singh Thakur.IANS

Besides optimism over some positive announcement from the government, a sharp slide in the oil prices amid a lull in tension in the Middle East between the US and Iran helped ease some concerns on the macroeconomic front. Brent crude prices have declined 12 percent to $57 a barrel this month. The easing of concerns about any further escalation of the US-China trade wars has also helped the market, according to observers. China's move to fix the yuan rate at a stronger-than-expected level has helped assuage fears of a currency war and a further flare-up in trade tensions. Most global markets, too, rallied on Thursday, reports say.

Domestic stocks have seen extensive correction following the Union Budget presentation on July 5. Budget proposals such as an increase in tax surcharge on FPIs, the introduction of 20 percent tax on share buybacks, and the move to increase the free float in all listed companies by 10 percent to 35 percent met with investor disapproval. Also, the perception of an economic downturn pushed the indices down more than 6 percent since the Budget.