The leading stocks showed a sign of recovery in late trade after it came sharply lower after a steep fall. However, the recovery proved short-lived as the market failed to sustain at higher level. The BSE Sensex tumbled more than 500 points in early afternon trade soon after the finance minster announced a hike in short term capital gains tax to 15 per cent from 10 per cent.
Just before the announcement of hike in short term capital gains tax by the finance minster, the market had recovered from lower level after an initial sharp fall triggered by announcement of populist measures in the Budget.
The market had opened in the red and remained subdued in early trade before Mr Chidambaram's budget speech, tracking weak global markets.
The 30-share BSE Sensex ended down 245.76 points or 1.38 per cent at 17,578.72 points from its last close, Sensex hit a low of 17,258.20 in afternoon trade. At the day's low, Sensex lost 566.28 points.
The S&P CNX Nifty index of NSE also declined by 61.60 points or 1.17 per cent to 5,223.50 points at the end of the session.
Capital goods and IT stocks fell even as Auto stocks rose. The market breadth was weak.
On BSE 1,627 stocks declined as compared to 1,071 stocks that advanced. 43 stocks remained unchanged. 24 out of 30 Sensex stocks declined.
BSE clocked a turnover Rs 6700 crore during the session compared to Rs 5,028.03 crore, the previous day.
India's wholesale price index (WPI) rose by 4.89 pc in the 12 months to February 16, 2008 over the same period last year, higher than the previous week's rise of 4.35 pc, government data showed today.
Earlier in the morning, the Finance Minister's announcement of a complete waiver of loans for small and marginal farmers had spooked PSU banking shares with exposure to the rural sector. Meanwhile, Finance Minister has withdrawn Banking Cash Transaction Tax (BCTT) effective from April 1 2009.
European markets opened weak. France's CAC 40, Germany's DAX and UK's FTSE 100 were down between 0.19 pc- 0.53 pc.
Indian economy, like all developing economies, was being hurt by global upheavals in prices, the finance minister said adding 'We need to be vigilant and be proactive to change our policies, to counter this global problem. The rise in global oil prices too has hurt us'.
Software stocks fell after after the Finance Minister did not announce any relief for the export-driven sector. Infosys came down by 4.21 pc to Rs 1,532. Similarly, Satyam Computer Services was down by 4.21 pc to Rs 431, Wipro by 3.21 pc to Rs 432.10 and Tata Consultancy Services by 1.45 pc to Rs 867.
Capital Goods stocks declined on profit booking by FIIs and local operators. Larsen&Toubro was down by 3.52 pc to Rs 3,513, followed by Bharat Heavy Electricals by 2.31 pc to Rs 2,270 and Suzlon Energy by 6.1 pc to Rs 280.
DLF was down by 3.15 pc to Rs 779.95 and Reliance Industries came down by 3.09 pc to Rs 2,458.25.
However, a few stocks looked up on scattered bull support mainly by FIIs. Maruti Suzuki rose by 4.33 pc to Rs 871.10 after government reduced excise duty on small cars to 12 pc from 16 pc. Government cut excise duty on hybrid cars to 14 pc, from 24 pc. Farm equipment maker Mahindra&Mahindra rose by 2.18 pc to Rs 695 after the Finance Minister proposed a higher farm credit target.
Bajaj Auto also increased by 2.27 pc to Rs 2,270 after the Government cut excise duty on two-wheelers to 12 pc from 16 pc.