After touching a closing peak of 6907.65 points on March 10, 2005, a good 193.79 points above the Budget day's close of 6713.86 points - the Sensex has since corrected sharply by 160 points to close at 6747 points on March 16, 2005.

In the days immediately following the budget, the Sensex had recorded impressive increases in each successive trading session, as investors perceived that there were no major negatives in the Budget.

The increase in securities transactions tax by 0.005 per cent was in line with investors expectations while the cut in corporate tax rate to 30 per cent and restructuring of Income Tax rates came as a bonus.

FIIs stepped up purchases in a major way, as they perceived the India's "growth story" to be sustained. FII net purchases in the March 01 to March 10 period were close to $1 billion at $972.30 million.

The rise in Sensex from the Budget day till March 10, 2005 was powered by index heavyweights like ONGC [Get Quote], Reliance [Get Quote] and SBI [Get Quote].

ONGC rose nearly 10 per cent from Rs 851.75 to Rs 930.85 concomitant with rising global crude prices globally.

Reliance gained 6.82 per cent from Rs 556.05 to Rs 593.95, despite the warring Ambani brothers, due to a peaking petrochemical cycle.

SBI gained almost 4 per cent from Rs 714.40 to Rs 742.50 as investors picked up banking stocks encouraged by banking reforms announced in the budget and the expectation of rising credit offtake and business.

Not all Sensex stocks participated in the rally. Stocks like Infosys [Get Quote] and NTPC declined somewhat during this period. But the gains easily offset any modest losses suffered by the declining scrips.

However, post March 10, there has been an element of caution setting into the markets with players preferring a wait-and-watch approach at higher levels.

If we compare the Sensex close on March 15, to the Budget day closing levels, Sensex is nearly at the same levels.

One of the realisations that has set in is the Fringe Benefits Tax, which is being perceived as a major setback with tax implications for corporates and a change in the way employees receive benefits.

There have been some other factors responsible for the correction in the indices. The main reason is that a section of the investors, particularly retail investors, felt that the market was at fairly high levels and hence due for correction.

Not wanting to get caught in the resultant drop in values, they pressed the sell button and booked profits.