India’s key stock gauges’ earnings estimates have been raised by as much as 10% by analysts after Finance Minister Nirmala Sitharaman delivered a $20 billion tax break in her latest attempt to boost economic growth from a six-year low.

The surprise reduction in corporate tax drove a 5.3 per cent surge in the S&P BSE Sensex Index to 38,014.62 on Friday, its biggest gain since May 2009. The government’s move may improve earnings, margins and help initiate capacity expansion before a potential improvement in consumer demand in the festival season starting next month, according to analysts and fund managers. The NSE Nifty 50 Index also climbed 5.3 per cent Friday, to 11,274.2.

“Consensus for EPS impact purely on account of the tax change is 7-10 per cent” analysts at Axis Mutual Fund wrote in a note last week. “A demand recovery during the upcoming festival season will further improve corporate earnings over the next few quarters,” the note added.

Here is what analysts are saying:

Bank of America

Calculations suggest the Nifty index’s 1-year forward consensus earnings estimate for FY20 could rise by 7 per cent

Capital expenditure may only pick up with some lag

Prefers bank stocks on hopes of improved businesses

Citigroup

Cut in the corporate tax rate could increase earnings of companies under coverage by as much as 8-9 per cent from FY20

Investors “will likely expect more big-ticket announcements”

Raises March 2020 Sensex index target to 40,500 from 39,000

Increases overweight on financial services and underweight on consumer, IT and utilities stocks

ICICI Securities

Analysis of Nifty earnings suggest an EPS upgrade of 6 per cent each for FY20, FY21

Expects Nifty EPS to grow at a CAGR of 20.3 per cent in FY19-21 from 16.9 per cent before the cut

Banking and consumer stocks likely to grow at CAGR of 48.2 per cent and 18 per cent, respectively

Software exporters, pharma not expected to see any upgrades due to existing lower tax rates

Nifty target based on FY21 EPS is 13,150, Sensex 43,000

Credit Suisse

Of the total revenue foregone, 58% of will be borne by the federal government while 42% will be a loss for states

Among consumer stocks, large tax-cut gains for Avenue Supermarts, Colgate, Nestle, Page Industries, Asian Paints, Crompton, Jubilant Foodworks, Britannia, Hindustan

Unilever

Lower gains seen for Marico, Titan, Dabur, Emami, Godrej Consumer

Expects most consumer companies to retain gains, at best spread over two years

Industrial companies with shorter production cycles, like ABB, Siemens, Cummins to benefit in near term; L&T and those with longer cycles to benefit over longer term

Auto companies may ask ancillary companies to pass on benefits to customers in current weak demand environment

Banks to see 10 per cent-12 per cent earnings impact, RoEs to improve by 100-200 bps