Mumbai: Indian equity markets surged above 1600 points on Friday after Finance Minister Nirmala Sitharaman said on Friday the government has cut corporate tax rates for domestic companies. Sitharaman said the ordinance for cutting tax rate has been passed.

Government will cut corporate tax rate for local businesses to an effective 25.2% from 30%. Domestic manufacturing companies will also not be required to pay minimum alternate tax, Sitharaman said.

She added that listed companies announcing share buybacks before 5 July will be exempt from buyback tax.

"This is yet another surgical strike on bears and negative sentiments in the economy which will create an environment of surplus in the hands of corporates for making further investments and ease their liquidity concerns. The reduction to 22% in corporate taxes will result in massive release of 1,45,000 Crs immediately in the economy which will boost sentiments and bring in real surplus to the corporates. Companies in Consumer Finance, banks both Pvt and Public sector, Hotels all pay upwards of 32% tax will have maximum benefits, however rest of the sectors will have nominal positive impact. This is a path breaking move delivered by Modi 2.0 government in the interest of economy at the cost government exchequer in times of crises which will go down well in the history," said Jimeet Modi, Founder & CEO, SAMCO Securities & StockNote

At 12:05 pm, the benchmark Sensex rose 5.09%, or 1837.52 points, to 37,930.99, while Nifty 50 was up 526.15 points, or 4.92% at 11,230.95 points.

"This is not bigger than budget, this is bigger than last 20 budgets," said Samir Arora the Singapore-based fund manager and founder of Helios Capital in a tweet

Meanwhile, hotel stocks trended higher as the GST Council is expected to cut rates on hotels that charge room tariff of 7,500 or more per night and currently attract 28% GST.

Taj GVK Hotels & Resorts surged 5%, Hotel Leela Venture jumped 3.5%, Indian Hotels Company rose 1.7%, EIH was up 0.7% and Lemon Tree Hotels gained 0.8%.

Among auto stocks, Maruti Suzuki rose 3.4%, Hero Motocorp Ltd 3%, Mahindra & Mahindra 2.6%, Tata Motors Ltd 2.2%,

Yes Bank surged 6% after the lender assured investors that the bank’s financial position was stable, despite the stake sale by one of its promoter entity - Morgan Credits Private Ltd. The lender said the stake sale was aimed at deleveraging the debt of this entity.

Zee Entertainment Enterprises Ltd was 10% lower after a Delhi High Court-appointed arbitrator ordered Chairman Subhash Chandra not to sell unpledged shares because of an ongoing dispute with Indiabulls Housing Finance Ltd. Chandra has secured a six-month extension from lenders to repay debt given its inability to pay back more than half of its dues by 30 September as agreed earlier.

Astra Poly Technik Ltd was down 4.5% after the company witnessed a series of block deals in which 2.3% equity stake changed hands, Bloomberg reported. However, details of buyers and sellers were not known.