The Bombay Stock Exchange (BSE) benchmark 30-share sensitivity index, the Sensex, plummeted by over 2000 points or almost 11 percent on Monday - its biggest ever intra-day fall - and dragged down stock prices of blue-chip companies to a record low, forcing the stock exchange to shut down trading twice abruptly.

Riding on a wave of panic selling triggered by weak global cues and fears of a potential US recession and existing credit turmoil, the Sensex swayed between 18,919.57 and 16,951.50 points during intra-day trade on Jan. 21 before paring the losses to end down 7.4 percent at 17,605.35. Since last week, the Sensex has suffered a total loss of 3,170.08 points. It set an all-time high peak at 21,206.77 on January 10.

Similarly, the broader 50-share S&P CNX Nifty of the National Stock Exchange (NSE) suffered a record loss of 496.50 points, the biggest in the bourse's history. It closed at 5208.80.

In spite of US President George W. Bush calling for a fiscal stimulus worth up to $150 billion in tax cuts and other measures, market participants felt this was not enough to cushion the world's largest economy from a recession.

While billionaire investor George Soros, according to an interview with the Austrian daily Standard, said the world was facing the worst financial crisis since World War Two and the United States was threatened with recession, reports that Europe's biggest bank, UBS, will shut its US fixed-income principal finance unit in an effort to salvage losses arising out of write downs of the subprime mortgage investments, only made matters worse.

The 1408.35 points drop on Monday - the biggest ever in absolute terms - has wiped out investors' notional wealth worth Rs.6,63,975 crore ($170 billion). Over five sessions last week, another Rs.5,21,310 crore ($134 billion) in notional wealth was lost.

The total market capitalization stood at Rs.59,53,525 crore at the end of Monday's trading against Rs.71,38,810 crore before bourses began business last week on January 14.

On May 18, 2006, the Sensex recorded its second biggest fall, losing 826.38 points or 6.76 percent to close at 11,391, following heavy selling by FIIs, retail investors and a weakness in global markets. On the same day, the Nifty crashed by 496.50 points (8.70 percent) to close at 5,208.80 points.

The market swing on Monday saw all the 30 Sensex stocks decline and end in the red. Overall, the market breadth was negative as only 139 stocks advanced and 2,657 stocks declined.

The losers' pack was led by Reliance Energy Limited (REL) which fell 16.38 percent over previous close to Rs.1776.05. Other major losers were ACC which fell 15.85 percent to Rs.727.6 percent, Bajaj Auto (15.21 percent) to Rs.2064.35, NTPC (14.15 percent) to Rs.205.65 and Reliance Communications (12.71 percent) to Rs.612.9.

Other heavyweights like Hindalco Industries, DLF, Grasim Industries and Reliance Industries Limited (RIL) were also down between 15 and 10 percent.

Tata Motors, BHEL and ONGC declined around 8 percent each to Rs.654, Rs.2,114 and Rs.1,114, respectively.

Mahindra & Mahindra, Tata Steel and TCS shed 7.5 percent each at Rs.673, Rs.722 and Rs.836, respectively.

SBI and Hindustan Unilever dropped around 7 percent each to Rs.2,200 and Rs.200, respectively.

Larsen & Toubro, Ranbaxy and Cipla were down 6 percent each at Rs.3,689, Rs.363 and Rs.190, respectively.

ICICI Bank and HDFC fell nearly 6 percent each to Rs.1,173 and Rs.2,660, respectively.

Bharti Airtel, Infosys, ITC, Maruti, HDFC Bank, Ambuja Cements and Wipro also fared poorly, down 3-5 percent each.

However, bucking the trend, Satyam Computer posted nearly 5 percent gains after the IT major reported a 29 percent rise in consolidated third-quarter net profit on continued growth in sales and said it expects a 45-45.2 percent increase in revenue growth in 2008 over 2007.

The company's net profit for its fiscal third quarter ended December 31 rose to Rs.434 crore from Rs.337 crore reported a year earlier.

India's richest men, Mukesh and Anil Ambani saw an erosion of their personal wealth on Monday as Mukesh Ambani's RIL lost Rs.3,71,116 crore in the course of the day, while brother Anil's Reliance Communications and Reliance Energy lost Rs.1,84,110.75 crore and Rs.82,303.02 crore, respectively.

ONGC, SBI and Bharti Airtel left shareholders poorer by Rs.2,04,000 crore, Rs.88,497 crore and Rs.86,638.25 crore, respectively.

Mid-cap stocks were worse off. The BSE Mid-cap Index declined 11.38 percent while the CNX Mid-cap Index shed 11.88 percent.

Among the sectoral indices, the BSE-Metal Index was the biggest loser, registering a fall of 13.3 percent, followed by Realty (12.83 percent), Oil & Gas (11.95 percent) and Power (10.94 percent).

Foreign funds have been net sellers for over Rs.12,000 crore ($3 billion) this month, the bulk of it executed since the beginning of last week.

[Monday's] sell-off was unbelievable. This is what digital economics could do. What I thought would take months to happen, happened in a day, said Ramdeo Agrawal, joint managing director, Motilal Oswal Securities.

The market is going through a technical correction primarily. I think the correction should end soon, said Vallabh Bhansali, chairman, Enam Securities.

The major factors behind [Monday's] market meltdown are US recession and margin call, besides panic selling has also crept in...all the major Asian markets are crackling like anything, Asika Stock Brokers' Paras Bodhra said.

Market valuations which were over stretched have been completely neutralized after [Monday's] fall. There were a huge number of over bought positions which were taken by amateur traders when the market was at all time highs, and those traders got trapped and therefore had to liquidate positions, said Vasant Joshi, technical analyst at Religare Securities.

This is just an overdone technical correction, not a sign of an approaching bear phase. The medium-long term trend remains intact. I recommend buying stocks, as valuations have now become attractive. There could be further downside tomorrow, but the cut will not be as sharp, he added.

The Indian markets have been the best performing market in the last four months. Now, when the tide turns, it is only natural that we have to bear the sharpest fall, said Shankar Sharma of First Global Securities.

It was the case during the dotcom period of 1999-2001. The shares of IT firms ran up the fastest in India during the latter part of the boom. In the crash, India faced the biggest fall, he added. Concerns of a slowdown are very much alive in India as it is with the US markets.

Indian markets are playing a little bit of catch-up with the other global markets. A liquidity squeeze and oversupply of stocks in certain sectors such as real estate, metals and power, where we have seen sharp run-up, brought down prices, said Keshav Sanghi, director and head of equities, Deutsche Equities India.

There is a global liquidity squeeze. Short-term we are not decoupled from the rest of the world, said Rashesh Shah, CEO of Edelweiss Capital.

The sharp fall was because of over-leveraged market. Brokers could have met their margin requirement but they maybe forced to sell more in the market, if clients default on payments, said Ambareesh Baliga, vice president, Karvy Stock Broking. He, however, advised investors to buy in a falling market, as fundamentals still remain strong.

No one can say if this is the low, but I would start hunting for top line companies that have corrected, say, 30-50 percent, said Gul Teckchandani, investment analyst. Try to understand companies, not prices, and then buy, he advised.

Meanwhile, the Finance Minister P. Chidambaram said on Tuesday that Indian investors should stay calm in the face of sharp stock market falls as the fundamentals of the economy are strong.

We had anticipated the market to open on a downward trend and hit the circuit breaker. My advice to investors is to stay calm, Chidambaram told reporters, adding that India's economy will continue to grow at a robust pace.

Prime Minister Manmohan Singh has also assured the investors that fundamentals of our economy are elementarily strong and that the market will grow in an orderly manner.

I would like to assure the Indian public that sustained orderly growth for capital markets is a priority concern, he said.

The government has advised investors to take informed and responsible decisions and not to act on the basis of market rumors or any unwarranted apprehensions.

The government also pointed out that most Asian markets opened the year 2008 on a weak note with participants indulging in heavy selling.

While the Sensex fell by 13.97 percent this month, Singapore's Strait Times declined by 14.75 percent, Hong Kong's Hang Sang by 13.58 percent and Japan's Nikkei by 9.29 percent, it said in a statement.

On Monday, the Nikkei slumped 3.86 percent to 13325.94, Hang Seng plummeted 5.49 percent to 23,818.86 and Straits Times declined 5.62 percent to 2,929.90.

European stocks also entered a bear market for the first time on Monday since 2003 with London's FTSE down 2.54 percent at 5,751.90, France's CAC 40 plunging 3 percent to 4,939.88 and Germany's DAX slumping 3.03 percent to 7,092.30.

Elsewhere, Australian stocks tumbled 5 percent and slipped into a bear market, defined technically as a 20 percent fall from their recent peak, for the first time in five years and analysts see more trouble ahead as investors keep bailing out.

Trading in the US was closed on Monday for Martin Luther King Day.

In a separate development, India's capital market regulator, the Securities and Exchange Board of India (SEBI) has asked for an explanation from the BSE for the shutdown in trading which took place twice on Monday at 2.49 pm and 2.52 pm as the rules allow the circuit filter (or the maximum allowed fall) of 15 percent before one-hour of close.

It was only a technical snag. It was not a circuit filter. It was just a coincidence (that the shutdown occurred when the Sensex fell over 10 percent), explained a BSE spokesman in response.

Under exchange rules, the circuit filter (or maximum allowable fluctuation) is triggered only if the benchmarks fall (or rise) 15 percent after 2.30 pm, or one hour before the close. Before 2.30 pm, the trigger is 10 percent.