The Sensex, the 30-share prime index of the Bombay Stock Exchange (BSE), took a beating on Tuesday, ending down 338 points on reports that the overseas operations of India's No.2 bank, ICICI Bank, had lost $264.34 million due to its exposure to the subprime crisis.
The benchmark index, which recorded its second biggest ever fall in absolute terms on Monday, by plunging 900.84 points, further holed out, Tuesday, losing 337.99 points to close at 16,339.89 with 19 components ending in the red.
The key index touched a low of 16,164.57 and a high of 16,754.06 points during intraday trade.
The Sensex was dragged down by shares in Sensex heavyweight, ICICI Bank, which fell as much as 9.3 percent, before paring almost half of the losses to close 5.2 percent down at Rs.971.60.
Following the sub-prime crisis overseas, ICICI Bank's overseas operations had reported market-to-market (MTM) losses of 264.34 million dollars on account of its exposure to credit derivatives and investments as on January 31, 2008, Minister of State for Finance P.K. Bansal told Rajya Sahba in a written reply.
ICICI's joint managing director had also reportedly said that the bank would provide for $70 million of investment losses on top of $90 million already written off and the remainder was notional.
However, ICICI Bank said that it had no subprime losses to declare as it has no direct exposure to problems in the US subprime mortgage lending market.
Rumors that other banks could report losses too, made the shares of India's No.1 bank, State Bank of India (SBI) plunge Rs.49.45 at Rs.1,873.95 and that of HDFC Bank by Rs.33.25 at Rs.1,357.30.
India's biggest firm in terms of market capitalization, Reliance Industries (RIL), fell 2.7 percent to Rs.2,241.50, reversing early gains. It has fallen 11.7 percent in three sessions after the budget proposed a 5 percent import duty on naphtha, used in making polymers.
Reliance and ICICI Bank constitute about a quarter of the main index.
Engineering and construction major Larsen & Toubro (L&T) fell 3.6 percent to Rs.3,223.15, taking its losses in three sessions to 11.5 percent after the 2008/09 Union Budget announced Friday contained little to boost infrastructure.
ACC dropped over 5 percent to Rs.746 while DLF and Reliance Communications were down 5 percent each at Rs.678 and Rs.514, respectively.
Cipla, ITC and Bharti Airtel also declined sharply today.
But automakers like Mahindra & Mahindra and Maruti Suzuki each gained more than 3 percent on hopes for higher sales after the budget lowered duty bringing prices down.
India's top aluminium and copper maker, Hindalco, rose 5.3 percent to Rs.199.90 as the metals hovered near record highs on the London Metal Exchange.
India's largest mortgage lender HDFC added 2.5 percent at Rs.2,636.
Reliance Energy Ltd (REL), Grasim Industries, Tata Consultancy Services (TCS) and Tata Motors also finished with gains today.
The BSE Midcap and BSE Smallcap indices ended lower by 2.48 percent at 7,182.23 and 3.09 percent at 8,953.28, respectively.
Among the sectoral indices, while BSE Bankex, BSE Capital Goods index, BSE FMCG index, BSE IT index, BSE Healthcare index, BSE Oil & Gas index and BSE Power index ended in the red, BSE Auto index and BSE Metal index ended in the green.
The BSE market breadth continued to be negative as 2,351 shares declined, 627 shares advanced and 67 shares remained unchanged.
The broader 50-share S&P CNX Nifty of the National Stock Exchange (NSE) slipped by 88.75 points at 4,864.25. It touched the day's low of 4812.95 and a high of 4,976.70 points.
Extreme nervousness is the best way to describe sentiment on Dalal Street. Going by the not-so-bad global cues today, we should not have reacted so badly. Interestingly, over the past 2 months, the US indices have lost around 4 percent, where as Indian benchmarks were down about 20 percent, which goes to show our market is not as strong as we thought it was and we are witnessing a correction of over heated prices, said Arun Kejriwal, director of KRIS.
The situation is so volatile that people are looking for a reason to panic, and ICICI was just that today, he added.
The people seem to have totally lost confidence in this market, at least for the time being. People are not really willing to put in fresh funds even at this point of time although the valuations are looking extremely decent, said Ambareesh Baliga of Karvy Stock Broking.
Our feeling is that this market should not really break those 16,500 levels very decisively. In case it does, then we could possibly test the lows which we had seen in January again, he said.
The Sensex recorded its biggest fall in absolute terms on Jan. 21, when it lost 7.4 percent or 1408 points. The third biggest fall was on Jan. 22 when the Sensex plunged 875 points to 16,730.
Elsewhere in the region, Karachi's 100-Share index fell 0.52 percent to 14,739.74 points, but Colombo's All-Share index gained 1.13 percent to 2,562.25 points.
US markets closed flat on Monday.