Bulls and bears slugged it out in an extremely volatile day's trading session, as the keenly-watched Union Budget under the new government, failed to hold the markets which extended losses for the third straight session on last-hour profit-taking.
Finally, the Sensex ended 72 points lower at 25,72.75 while Nifty closed with 17.25 points loss at 7,567.75.
Earlier in the day, the 30-share BSE Sensex opened higher with a gap of 79 points before taking a major plunge during the course of the budget announcement, thereby pulling down the Sensex to the day's low of 25,117.26 and Nifty at 7,479.05 level.
Although, the markets recovered for a brief period and advanced sharply in the afternoon trades, investors booked profits in last-minute trade, resulting in extended weakness.
Dealers said there were talks of a bank in Portugal defaulting in a few large debt payments that led to the sharp intra-day fall.
“The market has been amok in the past month, and it was buy on rumours and sell on news kind of a scenario,”said Raamdeo Agrawal, joint managing director and founder of Motilal Oswal Financial Services.
Dealers said there was heavy profit-taking as the markets were now focused on inflation, monsoon and global economics.
“The undertone is structurally bullish and the markets are comfortable with the budget. However there were some profit-taking that pulled down the market,” said G Chokalingam of Equinomics Research and Advisory Services. “I do see more than $10 billion flowing in the second half of current fiscal due to government initiatives,” he added.
Infrastructure stocks were back in the limelight after the budget announcement. Of the fifty stocks on the Nifty, 18 stocks advanced and 32 declined.
Among the gainers, Tata Power closed 3.06% higher at Rs 106 respectively. Other gainers were IDFC and Hindalco that ended at Rs 150.75 (8.1%) and Rs 175.20 (2.73%) respectively.
Most participants now are monitoring the developments on inflation and the monsoon besides the Index for Industrial Production data due for release on Friday.
They were optimistic on the government's initiatives towards foreign direct investments in insurance and the series of likely public offerings for retail participation in government banks.
“Government banks can now raise funds to shore up their capital as per Basel -III norms by raising funds form the public,” said an analyst form a brokerage.
Reuters adds: Mahindra and Mahindra Ltd fell 1.1%, although it has gained 23.4% so far this year. Hero MotoCorp ended 3.9% lower, though it's still up 17.5%.
Interest-rate sensitive shares fell even as a narrower fiscal deficit would help contain inflation. State Bank of India fell 1.4% while ICICI Bank lost 1%.
Software stocks fell ahead of Infosys kicking off the April-June results season on Friday. Infosys fell 0.53% while Tata Consultancy Services lost 1.9%.
But among gainers, some financial firms rose after Jaitley said the government would seek to raise the foreign investment limit in the insurance sector to 49% from 26%. Max India Ltd gained 0.83%.
IDFC gained 8.7% on government measures to boost infrastructure lending.
Meanwhile, real estate developers surged on Jaitley's plan to provide incentives for the establishment of real estate investment trusts.
DLF Ltd surged 9%, Prestige Estates Projects rose 6.3%, Indiabulls Real Estate advanced 5.03%, and Housing Development and Infrastructure Ltd gained 5.4%.
Road developers also gained after the finance minister proposed a Rs 37,850 crore ($6.32 billion) investment in National Highways Authority of India and state roads in the current fiscal year, traders said.
GMR Infrastructure Ltd gained 0.71%, IRB Infrastructure Developers Ltd rose 4.2% and Ashoka Buildcon rose 0.8% higher.