Buoyancy returned to Dalal Street on Thursday due to calm in global finance and news reports of the Finance Ministry making a positive announcement on tax issues pertaining to equity markets.

After its longest losing streak this year, the Sensex gained 638 points or 1.75 per cent to close at 37,327. The broader Nifty index rose 176 points or 1.63 per cent to close at 11,032.

Recent action by Pakistan and its attempt to mobilise global support against India’s move on Kashmir may not matter to stock markets unless it leads to military action, market experts said.

All the gains by the indices came during the last hour of trading after a television channel flashed news that the Centre would announce a rollback on the tax on foreign portfolio investors (FPIs) and even look at rationalising or removing long-term capital gains tax.

Since the announcement of the Union Budget on July 5, the Sensex and Nifty have fallen by around 10 per cent as even the global financial scenario was dismal due to the US-China trade war.

“On the charts, there is a case for the Nifty index to rise up to 11,500 levels if the situation remains calm in global markets. After such a re-tracement from the lower levels, which is a 61 per cent comeback after falling from their highs, the indices could purely move on the US and China showdown,” said Rohit Srivastava, fund manager, Sharekhan-BNP Paribas.

“Market investors are least concerned about Pakistan’s theatrics on Kashmir and share prices won’t react to it unless there is some sort of military escalation,” he said.

The government had effectively hiked the tax on FPIs by 19 per cent in this year’s Budget and even imposed a 20 per cent buyback tax that was seen as negative. It is likely that both of these could be rolled back and investors could even see some respite in long-term capital gains tax, brokers said after the news reports.

There was respite from the rally in gold futures too as the metal retreated to 1,500 levels after touching an annual high of 1,522 in dollar terms. Gold has been rallying for several weeks now as a safe heaven against the global currency war.

In the US, the Dow Jones index had crashed by 600 points or more than 2 per cent on Wednesday before pulling back as China set its currency peg lower. China on Thursday set its currency peg above 7 against the US dollar for the first time in 10 years but the markets took it as a positive as the peg was set below expected levels.

Also, China reported a surprising jump in its exports by 3.3 per cent year on year in July, up from a decline of 1.3 per cent in June. On Thursday, indices in the US were trading nearly 0.5 per cent higher at opening.

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