If the last week’s lows hold, the Nifty will attempt to cross 5,740 and then 5,770

The market declined over 2% in the Budget week as corporates and foreign investors were largely disappointed with the proposals announced by the finance minister on Thursday. While he made a clarification on the tax residency certificate issue on Friday, some other proposals are seen as a setback to foreign investments. Concerns about the twin deficits—current account and fiscal—also dampened sentiments.

The BSE Sensex declined 398 points (2.06%) to settle at 18,919 and the Nifty closed the week at 5,720, a fall of 131 points (2.23%). The market indices are down for the fifth week in a row. However, if the last week’s lows hold, the Nifty will attempt to cross 5,740 and then 5,770.

The market managed to close with minor gains on Monday amid high volatility on support from the IT sector. The benchmarks tanked over 1.5% on Tuesday on global concerns, which led to a broad-based sell-off in the domestic market. Optimism emanating from the Economic Survey that the government would be able to rein in the current account deficit led the market in the positive on Wednesday.

The lacklustre Union Budget which proposed higher taxes on corporates and individuals saw the market paring its early gains and crashing by over 2% from the day’s high on Thursday. The finance minister’s clarification soothed foreign investors, which helped the market close in the green on Friday.

BSE Consumer Durables (up 4%) and BSE IT (up 2%) were the top sectoral gainers in the week. The key losers were BSE Realty (down 9%) and BSE PSU (down 5%).

TCS, Infosys (up 3% each), Bajaj Auto (up 2%) and Wipro (up 1%) were the main gainers on the Sensex while Hindalco Industries (down 8%), Tata Steel, Reliance Industries, HDFC Bank (down 6% each) and Coal India (down 5%) were the major losers on benchmark.

The Nifty was led by TCS, Jaiprakash Associates, Infosys (up 3% each), Bajaj Auto (up 2%) and Wipro (up 1%). The top losers were Siemens (down 10%), Reliance Infrastructure (down 9%), DLF, Hindalco Ind and Punjab National Bank (down 8% each).

The much talked about Railway Budget, presented two days ahead of the Union budget, turned out to be largely a non-event. While sparing passengers from another hike within a month, Pawan Kumar Bansal, however increased charges for super-fast trains, and fees for ticket cancellation and reservations.

The pre-Budget Economic Survey for 2012-13, tabled in Parliament on Wednesday, projected a turnaround in the economy in 2013-14, with growth expected to be in the range of 6.1% to 6.7%, higher than the advance estimates of 5% growth in the current financial year. The improved growth, however, would be subject to a normal monsoon, further moderation in inflation, which should induce further relaxation of the tight monetary stance, and a mild recovery of global growth.

Finance Minister P Chidambaram, presenting his eighth Budget, did not have too many options before him. Corporates were miffed as he raised the surcharge on corporate tax to 10% from 5% for domestic companies, whose taxable income exceeds Rs10 crore per year, and raised the surcharge on dividend distribution tax to 10% from 5%. He also levied a 10% surcharge on persons earning above Rs1 crore a year.

India’s economic growth in the October-December period of the current financial year declined to 4.5% —the decade’s lowest quarterly growth.

In international news, US president Barack Obama on Friday ordered the start of $85 billion in government spending cuts, heralding a potentially decade-long wave of belt-tightening that is likely to impede US economic growth this year. The cuts total $1.2 trillion over nine years. Of that, $85 billion comes out of the budget for the remaining seven months of this fiscal year, making for effective reductions of about 13% for defence programs and 9% for non-defence programs.