It is one of the biggest rallies India’s key equity index Sensex and Nifty has seen in nearly a decade. Sensex gained more than 1,900 points or over 5 per cent while the Nifty index rose by 562 or over 5 per cent. India has cut its effective corporate tax rate to 25 per cent from an earlier rate of 35 per cent. Also, a new tax rate of 15 per cent for new manufacturing units was announced by finance minister Nirmala Sitharaman.

Read more:Government slashes taxes for corporate, new manufacturing firms

Banking, consumer and capital goods sectors will be the most benefited. Experts are calling it game changer announcements for the stock markets as a re-rating has happened for companies across the sectors. International companies will set up manufacturing units in India as they will compare tax rates in advanced jurisdictions to India. Market cap of listed companies were up by Rs 6 trillion in few hours of trading on Friday.

The rally was on the back of massive short-covering in futures and options segment that was built-up due India’s economic slowdown woes. BusinessLine had reported on September 4 that the short positions in India’s stock market had reached near record levels.

Also read:As shorts hit record levels, experts feel market could reverse

One of the biggest rally in India was in 2009 after the Congress led United Progressive Government led coalition won a majority in general elections. The Sensex and Nifty had then gained 15 per cent within minutes of market opening and had to be shut for trading that day as circuit filters were breached.

“We are expecting the markets to rally further by another 300-400 points. Buying will also continue on Monday. Banks, capital good and consumer companies will benefit most. A cut in GST too is expected shortly that could give another boost. In fact, Nifty is likely to close much higher today itself,” said Rahul Arora, CEO, Institutional Equities, Nirmal Bang. 

Arora is of the view that India could rally to record levels in the coming days. “This (announcement) is bigger than 20 budgets,” said Samir Arora, fund manager of Singapore based Helios Capital.

Sitharaman is likely to address another press conference shorty during the day with regard to GST tax cuts, sources told BusinessLine . Bank Nifty rallied by over 2000 points or nearly 8 per cent. Sitharaman also cut the additional surcharge of nearly 2 per cent on all category of investors in the share market that she had imposed in her budget.