New Delhi: The stock markets may see a relief rally this week after the government removed enhanced surcharge on FPIs and also unveiled various measures to jumpstart growth, analysts said.

Giving in to the demands of overseas investors, Finance Minister Nirmala Sitharaman on Friday announced rollback of enhanced surcharge on foreign portfolio investors levied in the Budget.

The Budget proposal to hike surcharge on FPIs had spooked foreign investors, who withdrew more than USD 3.4 billion (Rs 24,500 crore) from domestic equities in July and August. The massive capital outflows also put pressure on the rupee, which slumped to 72-level against the US dollar last week.

"Withdrawal of enhanced surcharge on FPI is a big positive for Indian markets as it could reverse the outflows seen since post Budget. It should also help INR appreciation. Overall, a good sentiment booster for the Indian economy," said Rusmik Oza, Head of Fundamental Research, Kotak Securities.

The Centre also announced a raft of measures to revive growth momentum, including exempting startups from 'angel tax', a package to address distress in the auto sector and upfront infusion of Rs 70,000 crore into public sector banks.

"Withdrawal of the surcharge on FPIs is a shot in the arm for the sagging market. One can now expect reversal of the FPI selling. The market is likely to look up from now on," VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services said.

"However, sustained rally in the market will happen only when we have visibility on good earnings growth and reversal of the slowdown underway in the economy. This requires more reforms," Vijayakumar added.

In a bid to address slowdown in the auto sector, the government lifted ban on purchase of vehicles by government departments, and allowed additional 15 per cent depreciation on vehicles acquired from now till March 2020.

The revision of one-time registration fees has also been deferred till June 2020.

These steps are likely to prop up the automobile sector and revive demand, said Ashwin Patil, Senior Research Analyst (Auto Sector) at LKP Securities.

"These are just the kind of measures which were required to boost the economy. In the immediate term, we can expect the markets to bounce back on Monday with a gap up opening, and continue the rally for a few sessions to come," said Amit Gupta, Co-Founder and CEO of TradingBells.

Over the last week, the BSE Sensex lost 649.17 points, or 1.74 per cent. On Friday, the benchmark rebounded 228 points ahead of the finance minister's address.