Sensex, the prime index of the Bombay Stock Exchange (BSE), fell marginally by 0.01 percent or 1.51 points, Thursday, dragged down by weak market sentiments ahead of announcement of India's annual budget on Friday.

The 30-share benchmark index recovered from an intra-day fall of as much as 0.8 percent to close at 17,824.48 points with 21 components ending in the green. The index touched a high of 17,922 in early trade and a low of 17,690 during the day.

The annual national budget, to be unveiled at 11 a.m. (0530 GMT) on Friday, is expected include tax cuts and measures to encourage higher spending to help boost slowing growth in the third largest economy in Asia and to woo voters ahead of national polls due by 2009.

The gainers pack was led by aluminium and copper maker Hindalco which rose 4 percent to Rs.203.85. On Wednesday, aluminium futures hit their highest in two years on the London Metal Exchange.

India's largest mortgage lender Housing Development Finance Corp (HDFC) and HDFC Bank (in which HDFC has 23.3 percent stake) gained 3.4 percent to Rs.2775 and 1.3 percent to Rs.1471 respectively.

Other major gainers were Bajaj Auto, which climbed 3.6 percent to Rs.2255, Mahindra & Mahindra, which surged over 3 percent to Rs.680 and state-run power equipment maker Bharat Heavy Electricals Ltd (BHEL), which gained 2.7 percent to Rs.2324.

Shares of Wipro, Cipla and Satyam also performed well, advancing over 2 percent each to Rs.450, Rs.206 and Rs.447 respectively.

Ranbaxy and Tata Steel also ended in the green, moving up nearly 2 percent to Rs.445 and around 1.5 percent to Rs.824 respectively.

Grasim Industries, NTPC, Tata Motors, Maruti Suzuki, Bharti Airtel, Larsen & Toubro and Tata Consultancy Services (TCS) closed with modest gains.

ITC, Hindustan Unilever (HUL) and ONGC ended the day with slender gains.

The losers of the day were real-estate giant DLF, which dropped over 2 percent to Rs.805 and India's largest bank, the State Bank of India (SBI), which declined 2 percent to Rs.2039.

While shares of Sensex heavyweight Reliance Industries Ltd (RIL) fell 2 percent to Rs.2537, Reliance Energy slipped nearly 2 percent to Rs.1601.

Other shares that ended in the red were Infosys Technologies, ACC and ICICI Bank, which were down around 1 percent each at Rs.1599, Rs.808 and Rs.1103 respectively.

Ambuja Cements was down by 1.45 percent.

The market breadth at BSE was marginally negative with 1,444 shares declining and 1,276 shares advancing and 64 remaining unchanged on volume of 278.9 million shares.

The index is down almost 16 percent from an all-time high of 21,206.77 on Jan. 10.

The BSE Midcap Index ended down 0.15 percent or 11.80 points at 7,711.76 while BSE Smallcap Index closed down 0.06 percent or 5.73 points at 9,668.16.

Among the sectoral indices, the BSE Metal index performed the best, ending up 2 percent at 16,972.01.

The BSE Auto index, BSE Capital Goods index, BSE Healthcare index and BSE Power index also ended up in a range of 0.56 percent to 1.7 percent.

However, BSE Bankex, BSE IT index, BSE Oil & Gas index and the BSE Realty index ended in the red.

The broader 50-share S&P CNX Nifty of the National Stock Exchange (NSE) ended up 0.32 percent or 17 points at 5,285.10. During intra-day trade, the index oscillated between 5,302.85 and 5,227.15 points.

Foreign funds have been net sellers of more than $3 billion so far this year, after buying a record $17.4 billion of Indian equities in 2007.

I think some short-covering happened in late trade. No one knows what the budget has in store. But if it comes out with some thing positive, then people won't like to be caught short, said Neeraj Dewan, director at Quantum Securities in New Delhi.

Today's session was expected to be rather bland as people were not likely to take aggressive calls on F&O (Futures and Options) expiry with the Budget only a day away. Once the finance minister speaks tomorrow, we will get a clearer idea of things to follow which will enable us to take a directional call on the market. But even if there are negative statements, having entered the March series quite light, losses will be limited, said D.D. Sharma, vice president (research), AnandRathi Securities.

The finance minister should move toward further liberalization with regards to foreign direct investment and other regulatory reforms. But, this being the last Budget the UPA presents ahead of general elections, the FM is likely to lend financial support more to the farmers and aam aadmi, Sharma added.

On Thursday, Finance Minister P. Chidambaram said he was confident of achieving economic growth of an average 9 percent for the next 5 years, even though a government report said it would be a challenge due to inflation and infrastructure constraints.

The economic survey for fiscal year 2007-08, however, added that inflation is likely to moderate in the coming months and capital inflows, which have pushed the rupee up and complicated monetary policy, should ease in 2008.

Elsewhere in the region, Karachi's 100-share index rose 0.39 percent to 15,079.71, while Colombo's All-share index gained 0.23 percent to 2,539.94.

Uncertainty in the US economy affected Asian markets which gave out mixed signals with Japan's Nikkei closing in the red while South Korea's Seoul Composite Index (Kospi) and Taiwan's Weighted index ended in the green.