It was the worst week for the Nifty in nearly 2-months, following heavy selling by Foreign Portfolio Investors. The Nifty ended the week with losses of 2.5 percent, while the BSE shed 2 per cent.

Reports by ET Now of the Prime Minister's Office and Finance Ministry's officials holding a discussion over tax surcharge, enabled a recovery in the markets on Friday, or else we were heading for an even deeper rout. In fact, the markets recovered from a 350 point fall, to end 100 points higher, thanks to the report.

The Union Budget had levied a tax surcharge on the super rich, which also became applicable to certain Foreign Portfolio Investors who were operating as trusts. This led to some heavy selling to the tune of Rs 17,000 crores in the cash segment by FPIs.

Should the government positively consider tweaking the surcharge at least to benefit FPIs, may lead to a strong rally, as these set of institutions may return back to the Indian markets.

Some of the favorites of the FPIs, particularly HDFC saw a spectacular come-back on Friday on these hopes. If today's reports of the PMO holding meeting does not fructify into concrete results, we may see a fresh sell-off in the markets. Investors need to tread with caution.

Goodreturns.in