After the Union government announced a surprise tax breather for India Inc, all eyes are now on the elusive foreign portfolio investors (FPIs) who have sold stocks worth almost Rs 36,000 crore since July.

Market circles are confident the overseas investors will stage a comeback, though one may initially not see a spike in inflows. The feeling is that the sales could halt for now and buying could happen later.

On Friday, Union finance minister Nirmala Sitharaman had announced a reduction in the corporate tax rate to 22 per cent without the benefit of tax exemptions as part of the stimulus measures to revive a slowing economy.

The steps follow a rollback of the higher surcharge on FPIs in August. Though the move was welcomed by the Street, it did not directly translate into a pick-up in FPI flows.

Data available from NSDL show FPIs have sold stocks worth Rs 5,578 crore so far in September after offloading over Rs 12,400 crore and Rs 17,500 crore in July and August, respectively. The question, therefore, is whether the measures announced on Friday will compel them to turn to the domestic equity markets. This comes even as the forthcoming earnings season is likely to remain disappointing.

Provisional data showed the FPIs made net purchases of Rs 35 crore in the cash markets on Friday. However, the picture was much better in the F&O segment where the net purchases stood at over Rs 7,300 crore.

“Though the FPIs may not rush to buy immediately and may buy over a period of time, the exit mode that we have so far seen will now stop following the measures announced by the finance minister on Friday. An added comfort to them is the appreciating rupee,” Arun Kejriwal, director at investment advisory firm KRIS, told The Telegraph. Kejriwal sees an 8-12 per cent upside for the markets following a better earnings picture for corporate India because of the measures announced.

An analyst with a domestic brokerage here added that with many sectors being in the over-sold territory, there are strong chances of the markets bouncing back to higher levels. He pointed out companies or sectors that could gain the most from the tax reduction is likely to see more rally.

According to brokerages, the sectors that could gain the most from Friday’s measures include steel, cement, capital goods, power and even a few FMCG companies. A report from ICICI Direct said the cement companies, which currently have higher tax rates, would benefit significantly from the reduction in the corporate tax cut.

Similarly, FMCG companies are expected to witness a 5-12 per cent increase in earnings due to the tax reduction.

Vinod Nair, head of research at Geojit Financial Services, said the markets will witness a revival in enthusiasm as the new fiscal measures will give investors a relief from the slowdown fears. “FIIs now have a good reason to come back to India,” he added.