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Finance Minister P. Chidambaram is planning to cut the public spending target for fiscal 2013 by up to 10 percent from this year's original target, in what would be the most austere budget unveiled in recent history as he tries to avert a sovereign credit downgrade.
Adding to the concerns was the Union Budget's unintended impact on inflationary pressure, which may further dampen the chances for rapid interest rate cuts from the Reserve Bank of India.
The Bombay Stock Exchange's 30-share index Sensex fell 0.04 percent, or 8.35 points to end at 19,317.01 while the National Stock Exchange's 50-share Nifty declined 0.03 percent, or 1.95 points at 5,850.30. Sensex marked its fourth straight weekly fall with a loss of 0.78%.
Among the sectors, BSE-metal, banks and FMCG led weekly drop posting a loss of 2-3% while real-estate, healthcare and IT indices on Sensex led gains for the week.
Broader markets ended mixed with BSE-midcaps falling nearly 0.3% and BSE-smallcap rose 0.4% this week.
Global sentiments were also jittery after the minutes of the Federal Open Market Committee’s Jan. 29-30 meeting showed policy makers were divided about the strategy behind Chairman Ben S. Bernanke’s program of buying bonds, amid hints of premature withdrawal of stimulus.
Mirroring the concerns, the S&P 500 slipped 0.3 percent and the Nasdaq lost nearly 1 percent, posting their first weekly fall this year. Only the Dow ended the week with a gain - up just 0.1 percent.
MSCI's world share index was off 0.5 percent for the week.
Meanwhile, a report from the European Commission that forecast the euro zone economy will contract again in 2013, and caution ahead of Italy's election this weekend, also weighed on the sentiments of the global investors sparking sell-off.
MOVERS & SHAKERS
TVS Motor ended down 3.6% at Rs 293 for the week back on news flow that proxy advisory firm Institutional Investors Advisory Services (IIAS) has opposed the proposed appointment of Sudarshan Venu, 24, to the board of directors of the Chennai-based company.
DLF touched a yearly high of Rs 281.80, before ending up 13% for the week after the management announced its intention to reduce its debt by half to Rs 11,000-12,000 crore over the next 2-3 years.
Housing Development Finance Corp, country's biggest mortgage lender, declined nearly 2% after global brokerage firm Goldman Sachs cut its rating to 'sell' from 'neutral' citing concerns India's economy would recover at a "modest" pace and the prospect of rising competition.
Jet Airways, country's biggest aviation firm, dropped 5.7% after the Abu Dhabi-based Etihad Airways put a host of new conditions including an option to buy up to 49 per cent stake in the firm.
OUTLOOK
Market is expected to trade range-bound ahead of federal budget next week. The Congress-led UPA government will present Railway Budget on Tuesday followed by economic survey on Wednesday and Union Budget on Thursday.
“We have big event lined up this month ... 5,800 remains crucial for Nifty below which selling pressure will emerge,” said Sahaj Agrawal, Deputy VP (Derivative research), Kotak Securities.
Markets will also respond to Reserve Bank of India's move on late Friday regarding the final guidelines for new bank licences which will allow any type of company to apply for a permit, paving the way for new banks after nine years.
Globally, Fed Chairman Ben Bernanke's testimony on February 26 will be a crucial trigger for the markets.
