(Representative image)

NEW DELHI: Equity indices continued its stellar performance on Monday with the benchmark BSE sensex rising over 1,000 points after the government’s surprise move to cut corporate taxes. Sensex zoomed 1,075 points or 2.83 per cent to close at 39,090; while the broader NSE Nifty settled 329 points or 2.92 per cent higher at 11,603.

The 30-share BSE index surged 2,996 points in just two sessions after rising 1,921 points on Friday.

Major gainers on the sensex pack include Bajaj Finance, L&T, Asian Paints, ITC, Axis Bank and Kotak Mahindra Bank with their shares rising as much as 8.70 per cent. 16 out of 30 stocks on the BSE platform closed in green.

On NSE, except for Nifty IT and Pharma, all other sub-indices witnessed heavy gains with Nifty Bank, Private Bank rising as much as 5.64 per cent.

Announcing the latest set of measures to jump-start flagging growth, finance minister Nirmala Sitharaman slashed the base corporate tax for existing companies to 22 per cent from 30 per cent; and for new manufacturing firms, incorporated after October 1, 2019, to 15 per cent from 25 per cent.

Sitharaman also clarified that enhanced tax surcharge will not apply on capital gains arising from sale of any security including derivatives in the hands of FPIs (foreign portfolio investors).

Besides, the all-powerful GST (goods and services tax) Council slashed tax rates on hotel tariffs and some goods with a view to addressing sectoral concerns and spur growth.

According to Shibani Kurian, senior vice-president and head of equity research, Kotak Mahindra AMC, corporate tax rate cut is a huge step in boosting the overall profitability of corporate India.

"This step along with some of the other measures announced including that the enhanced tax surcharge introduced in July 2019 shall not apply to capital gains on sale of equity share which is subject to securities transactions tax would go a big way in restoring confidence in the Indian equity markets," she told news agency PTI.

One of the biggest problems ailing the investment rate was low corporate savings and, to the extent, this tax cut boosts corporate savings, this is positive structurally for the improvement in private sector investment rate, she added.

"There will be long-term benefits since the tax rates have come down ... there is no doubt about it," Madhumita Ghosh, dean at Tasmac Global Solutions in Mumbai, told news agency Reuters.

"The move will also stimulate FPI inflows," she added.

Meanwhile, foreign investors FPIs purchased shares worth a net of Rs 35.78 crore, while domestic institutional investors bought equities worth Rs 3,001.32 crore, provisional data showed on Friday.

(With agency inputs)

