Mumbai, Aug 9 (IANS): Sensex and Nifty gained for the second straight day on Friday amid reports that the government could roll-back or tweak the controversial tax on the Foreign Porfolio Investors (FPIs).

Markets had bled heavily owing to the foreign fund outflow ever since the tax on FPIs was announced in the Union Budget last month.

Leading FPIs including J.P. Morgan, HSBC, Barclays, Standard Chartered, Deutsche Bank and prominent Indian company representatives met Finance Minister Nirmala Sitharaman on Friday to discuss the controversial tax. The FPIs are seeking a full roll-back or suitable tweaking to keep them out of the higher tax net.

The Sensex closed 254.55 points higher at 37,581.91. It closed on Thursday at 37,327.36. The Nifty closed at 11,109.65, higher at 77.20.

"Market gets a breather towards the close and reclaimed 11,000 level due to the expectation that the government is likely to be lenient on higher surcharge on FPIs which influenced bears to cover their short positions," said Vinod Nair, Head of Research, Geojit Financial Services.

"Additionally, prospects of lower interest rate going forward and strength in rupee will ease liquidity crunch situation."