The Sensex climbed 1.54%, gaining 1,109.10 points to close at 73,033.78, while the NSE Nifty jumped 358.60 points, or 1.60%, to settle at 22,721.95. (File photo)Stock markets staged a sharp rally on Tuesday, with benchmark indices surging around 1.6%, after Finance Minister Nirmala Sitharaman indicated that the government would consider stakeholders’ views on the removal of long-term capital gains (LTCG) tax during Budget consultations, describing the debate over securities transaction tax (STT) as healthy.The remarks fuelled hopes of tax relief for investors, although the government made no commitment to scrap either tax.The Sensex climbed 1.54%, gaining 1,109.10 points to close at 73,033.78, while the NSE Nifty jumped 358.60 points, or 1.60%, to settle at 22,721.95.It offered a reprieve to investors after a prolonged period of weakness, with buying interest extending across several sectors.“There’s an indication that the government is likely to reduce the LTCG and STT. The market has been going down for the last one year,” said a market observer. The Sensex has fallen 15% in the last one year.The rupee also rose for the third straight session on Tuesday and appreciated 50 paise to close at 95.28 against the US dollar, aided by various RBI measures aimed at reducing spot dollar demand and curbing excessive positioning in the foreign exchange market.Must Read | Debate on LTCG, market taxes ‘healthy’, ‘keen’ to hear about it: FM SitharamanThe finance minister’s remarks provided a much-needed sentiment boost to a market grappling with persistent concerns over taxation, elevated crude oil prices and the outlook for corporate earnings.Story continues below this adHowever, the rally also underscored how sensitive investor sentiment remains to policy signals, even in the absence of a concrete announcement. Any expectation of a reduction in capital gains tax or STT could improve the attractiveness of equities, but investors will have to wait for the Budget consultations to translate into actual policy changes.The optimism was particularly pronounced in stocks linked to capital-market activity, including stock exchanges and other market-related businesses.Yet, the absence of a firm government commitment means that expectations of tax relief remain speculative.Technology stocks provided the strongest impetus to the rally.Hariselvan Radhakrishnan, Founder & CEO of HST Wealth, said IT stocks led the advance after HCLTech’s quarterly performance, stronger AI-related revenue and healthy deal wins bolstered confidence in the sector’s earnings outlook.Story continues below this adTCS, Infosys and Tech Mahindra also advanced, making information technology the clear sectoral outperformer.The Nifty IT index surged over 5%, reflecting renewed investor confidence in technology companies amid expectations that artificial intelligence-related business and deal pipelines could support earnings.Realty and consumer durables stocks also recorded strong gains, while media and FMCG shares advanced.The rally, however, was not broad-based.The benchmark indices outperformed Bank Nifty, while the broader market lagged, indicating that large-cap technology stocks and other index-heavy counters accounted for a significant share of the gains. The Nifty Midcap 100 rose 1.06%, while the Nifty Smallcap 100, after recovering sharply from early weakness, ended 0.11% higher.Story continues below this adNifty Pharma was the only sectoral index to close in the red.The Nifty had opened flat before slipping to an intraday low of 22,288. It subsequently reversed course, sustained its upward momentum through the session and closed at the day’s high. NSE cash-market turnover rose 9% from the previous session, indicating an improvement in trading activity.Nandish Shah, Deputy Vice President, HDFC Securities, said market turnover had increased from the previous session. Market breadth remained positive for the third consecutive session, with an advance-decline ratio of 1.38, reflecting sustained interest in mid- and small-cap stocks despite their underperformance relative to the benchmarks.Brent crude remained elevated near $106 a barrel, posing a continuing risk to inflation and corporate margins. However, the US 10-year Treasury yield’s decline below 5.2% eased some immediate pressure on equity valuations. Earnings-led buying and short covering further strengthened the recovery.Story continues below this adTuesday’s rally offered relief to investors, but it did not eliminate the market’s underlying vulnerabilities. Elevated oil prices, inflation risks and uncertainty over the earnings outlook remain concerns. With no assurance yet of a reduction in LTCG tax or STT, the sustainability of the rally will depend on whether policy optimism is followed by concrete action and supported by stronger corporate earnings.