Stock market continued to fall for the fifth week by slipping 398 points to close below 19,000 level after three months due to sustained selling pressure as the government slapped more taxes on companies as well as super rich and offered little concessions for large investors in the Union Budget.
Confusion over the Tax Residency Certificate (TRC) announced by the finance minister on the budget day, which created fear among the foreign investors, also weighed on the market sentiments.
However, the finance ministry on Friday sought to assure worried investors saying that their concerns on TRC for claiming treaty benefits would be "suitably addressed" during discussion on Finance Bill in Parliament.
Rail Budget also failed to inspire investors which were already rattled by fears of worsening EU debt crisis following poll stalemate in Italy.
Profit-booking on the expiry of February series on Thursday also weighed on the market, traders said.
Realty, PSU, Refinery, Metal, Power, Capital Goods and Healthcare sectors declined sharply on profit-booking, while Consumer Durable, IT and Tech sectors firmed up on good buying enquiries.
Small-cap and Mid-cap shares also declined sharply by 5.63% and 4.36%, respectively, on panic selling triggered by speculation that pledged holdings are being sold.
The BSE benchmark Sensex resumed higher at 19,365.33 and moved in a wide range of 19,411.18 and 18,793.97 before ending the week at 18,918.52, a net loss of 398.49 points or 2.06%. It has lost 1,185.01 points or 5.89% in five weeks.
The NSE 50-share Nifty also dropped by 130.60 points or 2.23 pct to 5,719.70. It fell by 354.95 points or 5.84 pct in the last five weeks.
Banking stocks suffered heavy losses on liquidity concerns in banking system after government set target for gross market borrowing at Rs. 6.29 trillion this fiscal.
The sentiment turned bearish on hike in some taxes despite reduction in Securities Transaction Tax on mutual fund and equity futures transactions.
Auto stocks, including Maruti, saw losses as government announced hiking excise duty on luxury cars and their parts.
The sensex bounced back on Friday on value-buying after the Finance Ministry promised to address concerns over Tax Residency Certificate (TRC).
In the Lok Sabha Railway Minister Pawan Kumar Bansal hiked freight tariff of less than five%, effective from April 1 this year.
"There was nothing exciting in the budget and the freight rate hike could push up prices," said Pankaj Pandey, Head Research, ICICI direct.
24 scrips out of 30-share sensex finished in red while only six ended in green.
Major losers from the sensex pack were Hindalco Ind (7.65 pct), Tata Steel (6.27 pct), Reliance Ind (6.16 pct), HDFC Bank (5.79 pct), Coal India (5.46 pct), SBI (4.88 pct), Sterlite Ind (4.31 pct), DR Reddy's Lab (4.21 pct), Icici Bank (3.23 pct), Cipla (2.85 pct), ONGC (2.84 PCT), HDFC (2.76 pct), Gail India (2.62 pct) and Larsen (2.40 pct). However, TCS rose by 3.10% followed by Infosys 2.53%, Wipro 1.36% and Bajaj Auto 1.54%.
Among the major indices the BSE-Realty dropped by 8.60% followed by the BSE-PSU 5.00%, the BSE-Oil&Gas 4.59%, the BSE-Metal 4,56%, the bankex 4.43%, the BSE-Power 3.84%, the BSE-Capital Goods 3.55%, the BSE-HC 2.50%.
The Dollex-200 and the dollex-100 also fell by 3.45% and 3.37% respectively.
However, the BSE-Consumer Durable firmed up by 3.71% followed by the BSE-IT 2.39% and the BSE-Teck 1.71%.
Meanwhile, Foreign Institutional Investors (FIIs) slowed down their buying by investing just a net Rs. 543.99 cr during the week, including the provisional figure of February 28.
The total turnover at BSE and NSE jumped to Rs. 11,598.65 cr and Rs. 66,171.13 cr respectively from Rs. 8,773.91 cr and Rs. 49,738.97 cr last week.
Forex: The Indian rupee failed to maintain last week's gain, tumbling by 72 paise to finish the week at over 7-week low of 54.89 against the Greenback on month-end heavy dollar demand from importers and some banks amid sluggish local equities due to announcement of disappointing Union Budget.
Strong dollar overseas following weakness in euro after reports showed manufacturing gauge based on a survey of purchasing managers contracted in February. The dollar index was quoting higher against a basket of six major currencies as investors preffered to invest in safer assets.
Fresh sell-off by foreign funds over the announcement of Tax Residency Certifacte (TRC) by the Finance Minister in his budget speech on Thursday created fears in the foreign investors mind, also weighed on the rupee.
At the Interbank Foreign Exchange (Forex) market, the domestic unit resumed lower at 54.22 a dollar and hovered in a wide range of 53.60 per dollar and 54.94 per dollar before finishing the week at 54.89 per dollar, showing a net loss of 72 paise of 1.33%.
Previously, it had finished at 54.98 on January 8, 2013.
The Indian benchmark S&P Sensex dropped by 398 points or 2.06% to 18,918.52.
"The rupee fell below its more-than one-and-a-half month low against the US dollar in view of disappointing budget. International factors like weak euro and strong dollar index also pointed towards the rupee fall. As mentioned earlier, rupee moves closer to the target of 55.00 levels," said Mr. Abhishek Goenka. Founder and CEO, India Forex Advisors.
"Government proposing about Rs. 17,000 crore higher net borrowing target in the Budget, which was more than street expectations, hit market sentiment to a great extent. This in turn hit the rupee. Especially, banks stocks were badly hit on concerns of tighter liquidity situation," said Mohan Shenoy, Head (Treasury) at Kotak Mahindra Bank.
In a research note, Managing Director and Chief India Economist Tushar Poddar said: "With risks to the net borrowing requirement from the Budget to the upside, and no major proposals in the budget to reduce the current account deficit (CAD), we think there are depreciation pressures for the INR in the near-term."
Foreign Institutional Investors (FIIs) slowed down their buying spree by investing just Rs. 543.99 cr during the week including the provisional figure of February 28.
The premium for the forward dollar finished lower on receipts by exporters.
The benchmark six-month forward dollar premium payable in July closed lower at 164-166 paise from 171-1/2-172-1/2 paise last week and far-forward contracts maturing in January too settled lower at 332-334 paise as against 337-338-1/2 paise.
The RBI fixed the reference rate for the US dollar at 54.4815 and for euro at 71.2736 as against the last weekend's level of 54.4270 and 71.9061.
The rupee firmed up against the pound sterling to 82.50 from last week's close of 82.67.
However, it dropped against the euro to 71.55 from last close of 71.35 and also closed weak against the Japanese yen to end at 59.09 per 100 yen from 58.13.