Foreign funds pulled out from the market following a Union Government proposal to levy higher tax from them.
Updated at 6.10 pm
MUMBAI: Indian stock markets on Thursday witnessed the worst bloodbath in its history, plunging by a huge 826.38 points, on fears triggered by a proposal to levy higher tax on FIIs coupled with the downturn in global metal and equity markets.
The 'Tragic Thursday' surpasses all previous record falls of over 560 points in May 2004 and April 1992. The index settled at 11,391.43, down by 6.76 per cent from its previous close.
While the loss was initially confined to 600 points, Tata Steel's below-than-expected quarterly earnings dealt a severe blow pushing the index down to the day's low of 11,330.45 - registering an intra-day fall of 887 points.
An unperturbed Finance Minister P Chidambaram declined to comment on the cataclysmic fall, saying "everyday movement in the stock markets does not require a comment." Two days ago, he had termed the 462-point fall as a "technical correction".
Today's fall was triggered by the government's proposal to distinguish stock traders from investors for the purpose of levying tax.
The new draft guidelines distinguish shares held as stock-in-trade and shares held as investment to plug tax avoidance, particularly by FIIs -- which pay only 10 per cent tax on short-term capital gains.
They will have to shell out 41 per cent tax, if they are treated as traders.
Also, taking a cue from the dip in US stocks and world-wide crash in metal prices, investors rushed with frantic sell orders right from the onset of trading.
Metal, cement and commodity shares plunged along with a number of blue-chip stocks as selling pressure became wide-based.
The NSE's Nifty tumbled by 246.20 points or 6.77 per cent to close at 3,388.90.
All other Indices, which closed lower by over five per cent, were virtually dragged by panic over a stocks crash on Wall Street that saw strong possibilities that the Federal Reserve will need to keep raising rates to fight inflation.
All 30 Sensex-based scrips and 50 Nifty related counters recorded large falls at close.
Over 644 stocks from the mid-cap and small-cap segments were stuck in the lower circuit filter.
Fears of a margin call in derivatives also had an adverse impact on the sentiment.
Some Foreign Institutional Investors (FIIs), however, viewed the market's behaviour as normal, stressing the need of a correction of 10 to 20 per cent to make it more attractive.
The government, however, appeared to be unruffled over the unprecedented development on bourses, making no comments
on the historic slide.
The broad-based BSE-100 Index crumpled by 435.87 points to 5,881.70 from previous close of 6,317.57.
The BSE-200 Index and the Dollex-200 were quoted sharply down at 1,407.48 and 515.24 at close compared to last close of1,512.06 and 555.23 respectively. The BSE-500 Index dropped by 344.89 points to 4,536.60 from Wednesday’s close of 4,871.49 and the Dollex-30 ended lower at 2,056.37 from 2,212.36.
The volume of business, however, was low at Rs 4,862.91 crore. RIL continued to be the most active scrip with highest turnover of Rs 325.25 crore followed by Tata Steel (Rs 250.39 crore), Bharti Tele-Venture (Rs 141.70 crore), Bombay Dyeing (Rs 137.19 crore) and SBI (Rs 132.86 crore).
RIL dipped by 82.40 to 1004.70, SBI by 82.35 to 908, ITC by 13.70 to 191.15, Infosys Tech by 172 to 3039.75, Tata Steel by 66.80 to 545.45, ONGC by 92.75 to 1348.70, Satyam Computer by 51.70 to 716.45, ICICI Bank by 34.80 to 591.55 and HDFC by 64.45 to 1289.35.
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