September 20, 2019 / 6:30 AM / 3 months ago

CORRECTED-UPDATE 1-Indian shares soar 5% as gov't cuts taxes to prop up growth

(Corrects to 25.17% from 25.75% in second paragraph)

By Chris Thomas

Sept 20 (Reuters) - Indian shares surged over 5% on Friday and were set for their best day in more than a decade after the government announced deep cuts in corporate taxes to revive flagging growth in Asia’s third largest economy.

Finance Minister Nirmala Sitharaman said the effective corporate tax rate would be lowered to 25.17% from 30% and scrapped the minimum alternative tax for domestic companies.

“The reduction in corporate tax rate will “augur well for our economy,” Reserve Bank of India chief Shaktikanta Das said, speaking at a conference in Mumbai.

The broader NSE index jumped as much as 5.2% to 11,256.15, while the benchmark BSE index jumped 5.3% to 37,990.47.

The rupee INR=D4) rose as much as 0.9% to 70.68 against the dollar, its strongest level since Aug 9, while the yield on benchmark 10-year bond rose to 6.71% versus 6.57% in early trading.

Shares of top private-sector lender HDFC Bank Ltd, soared nearly 10% - their most in over six years, sending the Nifty Bank index up 6.7%.

“The markets have been asking for a big fiscal stimulus and the government has delivered,” said Rusmik Oza, head of fundamental research at Kotak Securities in Mumbai.

Corporate earnings may see an almost 12% jump in the next quarter for full tax paying companies due to the cut, and the markets can go up nearly 10%, Oza said, adding that foreign investors would cheer these measures.

The Nifty Auto index jumped 7.9%, its sharpest intraday climb since July 2011, with Eicher Motors Ltd surging 24%. (Reporting by Chris Thomas and Derek Francis in Bengaluru Editing by Sherry Jacob-Phillips and Saumyadeb Chakrabarty)

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