At close, the Sensex was down 40.74 points compared with the previous close of 3778.44. Interestingly, NSE's first day of the new settlement saw the bourse recording the highest ever turnover of Rs 3142.49 crore.The sharp drop in the Sensex in mid-session was due to the steep fall in SBI and Reliance. However, steady buying support in market favourites -- pharma and software -- lifted sentiment towards close. Brokers said the dip in prices, especially in the banking counters, was nothing but a correction on the huge gains recorded in the previoussessions. SBI had a total reversal of fortune with the stock attracting only sellers compared with yesterday's situation when there were only buyers. The stock closed at the lower price band of Rs 207. Most banking stocks including HDFC Bank, ICICI Bank, Corporation Bank, Bank of Baroda and Bank of India also hit the lower price band with only sell quotes available.

"State Bank was continuously on the upper price band since RBI cut interest rates and has already given a 40 per cent return. Unlike pharma or software stocks, there is yet no fundamental shift in the fortunes of banking scrips to sustain the type of rally that was witnessed in the previous sessions," said a trader. Domestic institutions were said to have initiated large-scale profit-booking after SBI moved up to the crucial resistance level of Rs 230 immediately after the opening session. "Barring SBI and Reliance, the market mood was perfectly alright. I don't think there is any change in the bull sentiment," said BSE broker Ajay Bagri.

Thetop gainers included Pentofour Software, Siemens, Dr Reddy's, Global Telesystems, Arvind Mills, MRF, Godrej Soaps, all of which closed at the upper price band. Other key gainers included ITC, HLL, Lakme, BPCL, Cochin Refinery, Gujarat Gas, Siemens, Pfizer, Glaxo, E-Merck, Smithkline Pharma, Proctor & Gample, Colgate and a host of smaller stocks in the B1 group. MTNL, ACC and a host of other major scrips held their previous gains and moved sideways. Banking scrips led the losers along with Reliance, Castrol and Bhel. Telecom scrips like Tata Telecom and VSNL registered handsome gains, while MTNL saw a moderate decline.

Major correction due in April, say marketmen

A major correction is due in April as investors are likely to book profits at that time to take advantage of the change in capital gains tax. Capital gains tax for resident Indians has been brought down from 20 to 10 per cent in the Union Budget.

Till then, the market is expected to move upwards with minor bouts of correction. Accordingto marketmen, the current rally in the market is likely to be sustained untill then as the market has witnessed less of speculative trades and more of genuine buying. According to Ravi Mehrotra, chief investment officer, Kothari Mutual Fund, the fourth-quarter results of infotech stocks and the first-quarter results of FMCG and pharma stocks is critical for a sustained buoyancy in the markets. Raamdeo Agrawal, director, Motilal Oswal Securities, said sellers had completely disappeared from the market. ``I don't think anyone wants to pay ten per cent more when they can wait for a couple of weeks,'' he said.