Sugar share markets surged in early trade Friday following the Cabinet decision late yesterday to decontrol sugar sales . But the broader market continued to be under pressure as investors were wary of buying stocks despite the steep correction in prices over the last few sessions.

The BSE Sensex was down 33 points at 18476 and the Nifty down 7 points at 5567. Shares of Bajaj Hindusthan, Balrampur Chini and Shree Renuka Sugars were up 7-9 percent as realizations are expected to improve now that government intervention has been scrapped.

“We estimate the impact on earnings for Balrampur at Rs 3.5/share annually and the fair value impact at Rs 25/share based on cost of equity of 14 percent,” said a note by brokerage house Jefferies.

“Whilst we await the fine print and timeframe of its applicability, we estimate removal of the 10% levy quota if effective from April 1, 2013, would imply average sugar realizations improving 4% and street EPS estimates having upside of  around Rs 3 for Balrampur Chini and Rs 0.6 for Shree Renuka Sugars,” said a Morgan Stanley note to clients.

Brokers said the mood in the market was quite nervous following the steep fall in large cap shares in the last couple of sessions. Talk is that foreign-owned exchange traded funds investing in Indian equities have turned sellers as they are facing redemption pressures in their home market. This in turn, could trigger selling by other fund houses as they try to cash out before stock prices decline further.

Maruti, GAIL and Bhel were the key gainers in the Sensex, up 1-2 percent, while ITC, HDFC and Wipro were among the laggards, down around a percent each. DLF shares were up 1.5 percent after the company said it had raised Rs 240 crore by selling renewable energy assets, a non-core business.

Essar Oil shares were up around 5 percent on a report that the company has exited the corporate debt restructuring cell, and that it would use the external commercial borrowing (ECB) route to refinance its debt.

Among second line shares, MMTC, AstraZeneca Pharma and Jain Irrigation were among the key gainers, up around 2 percent each. Overall, midcap shares were faring better than their large cap counterparts, where there worries about further selling by foreign institutional investors.

Shares from the realty, auto, and oil & gas sectors were in demand, while those from the IT and FMCG sectors were slack.  According to Ajay Srivastava of Dimensions Consulting, the market was likely to be volatile for some time, as most investors would prefer to take short term calls.