Nifty may see the level of 5,195

The market closed flat with a negative bias as the status quo by the Reserve Bank of India (RBI) by keeping key rates unchanged and the budget, which estimated a higher fiscal deficit for the next fiscal and a hike in service tax, put off investors.

The Sensex closed 37 points (0.21%) lower at 17,466 and the Nifty ended the week at 5,318, down 16 points or 0.29%. Friday's market move was one of the signs of increasing pressure for selling. If the bulls don't make a comeback from the current level, we may Nifty headed towards 5,195.

The RBI's CRR cut on Friday saw a positive opening on Monday but nervousness ahead of the Union Budget resulted in the market closing with modest gains. Sustained buying by institutional investors and a positive global trend led the market higher on Tuesday. A rise in headline inflation for February overshadowed the Railway Budget leading to a positive close, but with a diminishing strength.

A status quo by the central bank in its quarterly policy review on Thursday resulted in the market snapping its four-day gaining streak and closing in the negative. Worries about the high fiscal deficit, as highlighted by the finance minister in his Budget speech, and a rise in service tax led the market lower on Friday.

In the sectoral space, BSE Fast Moving Consumer Goods gained 3% and BSE Auto rose 1% while BSE Consumer Durables and BSE Realty were down 2% each.

Among Sensex stocks, GAIL India (up 5%); Hindalco Industries, ITC (up 4% each), Tata Motors (up 3%) and Hero MotoCorp (up 2%) were the top gainers. The losers were led by Sun Pharma, DLF, Bharti Airtel (down 4% each), ONGC and TCS (down 3% each).

The top five stocks on the Nifty were GAIL India, Hindalco Ind (up 5% each), ITC (up 4%), Ambuja Cements (up 3%) and Maruti Suzuki (2%). The main laggards were Cairn India (down 8%), Sun Pharma, DLF (down 4% each), ONGC and Kotak Mahindra Bank (down 3% each).

Finance minister Pranab Mukherjee, in his Budget speech, raised the income tax exemption limit from Rs1.8 lakh to Rs2 lakh. Further, income between Rs 2-Rs5 lakh will be taxed at 10%; income between Rs 5-Rs10 lakh will be taxed at 20%; and income above Rs 10 lakh-the tax will be 30%.

He also hiked excise duty and service tax by 2% across the board to raise Rs45,940 crore. Prices of all non-oil goods are likely to go up due to the 2% rise in the effective rate of excise duty of 10% and service tax as well as on account of the widening of tax net to all services, except 17.

With inflation remaining high, the RBI on Thursday kept interest rates unchanged for now, but made a promise that cost of borrowing will come down in future. The benchmark policy interest rate (repo rate) at which RBI lends to banks has been kept unchanged at 8.5% and the cash reserve ratio (CRR), the portion of deposits banks need to keep with RBI, has been retained at 4.75%. This rate was reduced last Friday (10th March) by 0.75 percentage points to infuse Rs48,000 crore in the system to ease liquidity.

In international news, the European Financial Stability Facility (EFSF) will contribute 109.1 billion euros ($142.60 billion) to the second Greek bailout after covering the costs of the Greek debt swap, the EFSF's chief executive Klaus Regling said. The second bailout for Greece, funded by the EFSF, comes on top of the fund's assurances to Ireland and Portugal, the two other Eurozone countries that have been cut off from the markets and need euro zone loans to avoid bankruptcy.

The US consumer price index increased 0.4% in February, mainly on a rise in gasoline, according to the Labor Department. Excluding the food and energy category, core CPI edged up 0.1%. Experts fear that the rise in energy costs would hinder the economic recovery.