The Sensex, after touching the day's high of 3624.58, dropped by almost 38 points to finally close at 3586.8 points. The BSE-100 index improved by 6.56 points to 1574.04 from its previous close of 1567.48. Turnover on BSE stood at Rs 1779.95 crore with Group A contributing almost 89 per cent at Rs 1580.31 crore.

Foreign institutional investors, who were more or less absent for the past few days on account of the Easter holidays, are believed to have been backin select counters. Compared with a small net FII inflow of Rs 5.3 crore on Monday and Rs 4.3 crore on Tuesday, Wednesday saw hectic purchases by foreign funds. They bought stocks amounting to Rs 91.5 crore and sold shares worth Rs 87.2 crore, indicating a major switch in portfolios.

``With the political situation still remaining fluid after the resignations of two AIADMK ministers, the market is likely to remain volatile'', said a BSE broker. However, most marketmen feel the software stocks, which have lost substantial values in the past few days, are attractive ahead of their annual results. Rolta Limited has already reported a 40 per cent growth in bottomline. Infosys', whose board is meeting on April 9 to consider the annual results, is likely to post a net profit of around 130 crore. The scrip was firm in the first-half of trading and touched the day's high of Rs 2899 before closing lower at Rs 2825 with a volume of 1.82 lakh sahres on BSE.

Select FIIs were reported to have picked up small quantitiesof ITC, HLL, German Remedies and Infosys Technologies. The rise in the Sensex was largely attributed to the rise in key scrips like HLL, MTNL, BSES and TELCO. Institutional investors - domestic as well as foreign - were reported to be active buyers at counters like like Zee Telefilms, Pentafour Software, NIIT and selected pharmaceutical counters. Covering by the short sellers also helped the sentiment and the stock prices improved.

Pharmaceutical stocks were in the limelight following fresh institutional activity. Counters like Cipla, Ranbaxy Laboratories, Nicholas Piramal, Glaxo, Smithkline Beecham Pharma, Pfizer and Rhone Poulenc were firm and moved up from their previous closings.

Power company shares continued to move up further on reports of government contemplating to de-link their rate of return from the Bank Rate. BSES hit the upper limit of the circuit breaker at Rs 168.90 and Tata Power was also firm in the range of Rs 78-79. MTNL bounced back after a long time and zoomed from Rs 160 to Rs172.20 on institutional buying. Rumours of a likely buy-back by the company seems to have fuelled the rally in the stock.

Although the political situation is expected to remain fluid for some time, institutional investors, who have been supporting the markets, are likely to continue doing so. Players feel the markets should remain range-bound in the period of uncertainty - at least until April 12 when the AIADMK supremo arrives in New Delhi. Pentafour Software was the most traded scrip in Group A with close to 31.43 lakh sahre changing hands with a total traded value of Rs 379.34 crore. ITC followed next with a total traded value of Rs 181.45 crore. In B1 group, the top five traded stocks were again from the software sector.