The Sensex, which opened weak at 4703 points, climbed up initially to 4721 points, before the news that the Infosys ADR had dropped spread in the market. The Sensex went below the 4600-barrier, to touch an intra-day low of 4586 points, before it recovered on late buying coupled with short-covering.

The unsung hero of Tuesday's trade was Hindustan Lever, which gained Rs 70 to end at Rs 2,518 on rumours of a stock split in the ratio of 1:4. The market expects the FMCG giant to announce a stocksplit along with its first-quarter results later this month. ITC, which had managed a marginal rise on Monday, dropped below Rs 1,000 to Rs 996, before it closed at Rs 1,007. A foreign institutional investor (FII) is believed to have dumped about three lakh ITC shares and shifted to HLL. FIIs were also active in pharma counters like Pfizer, Glaxo and Cipla.

``The market had rallied by 77 points on Monday after Infosys and other IT stocks like Satyam hit the upper end of the circuit, while cyclical stocks had closed lower. The last day of the settlement on the NSE saw investors square off positions coupled with profit-booking at some counters,'' said a market participant. Satyam Computer lost Rs 80, to end at Rs 1,406, while MTNL shed Rs 12, to close at Rs 235.

``The market is likely to see scrip-based activity. Those operators who have booked profit in software may re-enter at lower levels. The operators are waiting for FIIs to pump in money before they take positions,'' said a broker. ``It is time to buyas stocks have reacted and by Friday, we may see the Sensex go past the 4810-level,'' added a BSE broker Neel Dalal.

The FII figures have also been a dampener for the markets. The foreign investors, who have poured over Rs 1,200 crore in July, have booked profits since Friday. While they were net sellers to the tune of Rs 43 crore on Friday, their net sales were Rs 17 crore on Monday.

``The market may go down another 50 points from this level and 4535 is a crucial level. Pharma and FMCG stocks are meant for value-based investments, while one should shift to cylicals for trading. Software stocks are fully priced at current levels and will be a good buy if they decline. Investors are expected to re-enter at lower levels as there is liqudity in the system,'' said Chirag Sanghvi at Asit C Mehta Invest Intermediaries.

However, a section of the market expects activity in the market to die down. ``Sensex is likely to hover around the 4500-level and the movement will depend on the news flow. If cement resultsare not good, there will be further disappoinment,'' said a fund manager. ``I feel it should react some more. The steam is vanishing and the Sensex is forming a lower bottom,'' said a dealer.