To add to the confusion were rumours that two BSE brokers would fail to live up to their pay-in obligations on the exchange, on account of higher positions built on behalf of Harshad Mehta, also unnerved the market.

"The market has always thrived on rumours. If nothing moves then the players spread rumours, seeking an exit point," said Harshad Mehta.

With marketmen having built huge positions in anticipation of a vibrant and dynamic credit policy, the mediocre approach adopted by thepolicy makers failed to enthuse the market. Reflecting, the weak undertone of the market in the absence of three expectations (banks to be allowed to participate in badla financing, a further cut in the CRR and increase in the levels of direct entry for banks in the securities market) sales continued to outbeat demand for stocks even at lower levels.

"The forward positions of over Rs 1,200 crore is a disturbing factor. It makes sense for the operators to unwind their long outstanding positions since the next four settlements would continue to be dry in the absence of any policy measure from the government," said the chief of dealing of an FII brokerage firm. An interesting feature of the day's session were the fruitful attempts made by the local punters to hammer down the big bull favourite stocks.

BPL, Sterlite, Zee Telefilms and many other stocks which rose over 50 per cent during the past three settlements were seen locked at the lower end of the price band on the BSE. According to market sources, UTIand other domestic FIs continued to emerge as aggressive buyers at the counters of Telco, MTNL, Tata Tea, Bajaj Auto and SBI. However, their purchasing power took a severe beating with the local and foreign punters continously offloading major chunk of their long holdings. The software stocks, however, continued to mirror a divergent trend, with select representatives outperforming the market trend. Stocks of BFL Software and Pentafour Software traded at the upper end of their price bands on the local bourses.

However, Silverline was hammered down to a low of Rs 51.75 on the NSE and Rs 53.45 on the BSE with a huge volume of over 9 lakh shares.

NIIT continued to attract FII purchases at the lower levels. "Indian corporates are faced with significant slowdown and business confidence has dipped to a five-year low. We hope that the credit policy serves its prime purpose of lowering lending rates, inducing banks to lend aggressively and thereby increasing industrial production," said Shitin Desai, vicechairman and managing director of DSP Merrill Lynch. Although, the banking stocks failed to react to the liberal credit policy, a section of market men strongly feel that the reforms may help the private sector banks perform extremely well in a competitive environment, however, banks like SBI may be hit badly in the long term. "The slash in the margin prescription levels from 50 to 25 per cent will help infuse more liquidity into the system. Considering the long term implications of the cut in the margin deposit it can be seen as a first step towards allowing banks to take part in badla financing," said Arun Kejriwal, chief of dealing, Wood Stock Securities.