For the Sensex, the pit looked bottomless, as a fresh wave of trouble emanated from the Yen which plunged below 146 to the dollar. The Yen scare dragged almost all the Asian markets down and threatened to engulf the rest of the world when the outlook was bearish in early trades in Europe.

FIIs continued to sell overshadowed by regional worries and fresh uncertainties, while big operators remained on the sidelines. Many brokers said that UTI did not step in to support the market. A senior UTI official, however, said that the Trust was as active as always and was a netbuyer. "We were definitely in the market and it is wrong to say that we did not make significant purchases," said the official.

While the BSE Sensex witnessed the steepest fall since the fall of the Deve Gowda government in 1996, the NSE Nifty crashed 54.35 points to close at 916.80 points. The Skindia GDR index recorded an all-time low of 574.26 points to register a sharp fall of 9.84 per cent during the mid-day session at 13.30 GMT.

According to market sources, Capital International, Morgan Stanley and Credit Lyonnais were rumoured to have dumped stocks worth Rs 250-300 crore in a single day.

"The markets are depressed because of the threat of sanctions and the crash in Asian markets which has caught up with India as well," said Ranjan Pal, head of research of Crosby Securities.

"Sentiments in the local markets will continue to remain at a lower ebb until the pay-in on the NSE and BSE accomplishes a smooth note. We need to reach a point where the market will give out clear signals about itsdirection," said a BSE director, explaining the uncertainty in the market about where the bottom lies.

NSE managing director RH Patil said that the pay-in for securities, which was in progress throughout Monday, had not sent out any signal of a default. "We would have to see the pay-in of funds, however, to come to any conclusion," he said.

The SEBI slapped a fresh set of margins to avoid concentration of speculative interest in a few scrips. A margin of 10 per cent will have to be paid if the carryforward position in any scrip exceeds 3 per cent of its share capital. In addition to this, a 5 per cent margin will be levied on excessive concentration of net outstanding positions on a single or few scrips in both cash and carryforward trades.

The additional margins will come into effect from the next settlement onwards. All the margins will be collected in the form of cash, fixed deposit receipts and bank guarantees only.