Reflecting the lacklustre mood of the market, the Nifty Index, which was rangebound, closed at 924.35 points, down 7.80 points.

According to market sources, while Sebi's measure to curb short sales and impose additional margins was aimed at restoring the market equilibrium, market participants preferred to keep away from the market which reflected on the volumes.

On the NSE, the volumes have dipped by 50 per cent over the past two weeks, bringing the figure down to a low of Rs 808.39 crore, while on the BSE the turnover reduced to a low of Rs 667.76 crore.

According to market sources, FIIs were rumoured to have sold at the counters of Wartsila Diesel, Nestle, HLL, Reliance, Bhel and Sterlite.

Credit Lyonnais, MorganStanley brokerage and DSP Merrill Lynch were reported to have sold shares of ABB and Indo Gulf Fertilisers.

NSE's figures on institutional transactions reported on the exchange shows that FIIs have been net buyers on the exchange to the tune of Rs 5.10 crore, while the domestic institutions have bought stocks worth Rs 1.10 crore.

"A major portion of the volumes are built on account of arbitrage opportunities. If Sebi decides to bring in a uniform settlement system, the market is bound to suffer in the absence of hedging facilities," said a BSE broker.

Interestingly, despite Barings India hiking the open offer price to Rs 175 for acquiring 20 per cent in BFL Software, the stock took a beating on the local bourses on Friday. The stock hit the lower end of the price band to close at Rs 252.80 on the NSE.

According to market sources, the fact that the preferential allotment was made at Rs 65 while the stock was quoting at Rs 250 has disturbed the investors. However, some of the other infotech counterscontinued to move northward to hit the upper end of the price band.

Square D Software, Silverline Industries, Digital Equipment, Leading Edge, Pentafour Software and Mastek were locked at the upper end of the price band.

Rumours that AIADMK chief Jayalalitha had pulled out the party's support to the BJP, further unnerved market participants who refused to build fresh positions. Hectic covering of short positions at the counters of Indian Shaving Products, Indian Hotels and Grasim saw these counters register gains of over 9 per cent.

The shortcovering was attributed to the last day of the settlement cycle and to Sebi's directive to cover all short positions in the market.