Mirroring the trend, the 30-share BSE Sensitive Index opened lower at 3,625.21 points and drifted downwards to touch an intra-day low of 3,499.83 points before closing at 3,519.39 points compared to Thursday's close of 3,686.29 points, netting a loss of 166.90 points. The S&P CNX Nifty index slumped by 52.05 points to close at 1,011.40, down from its previous close of 1,063.45 points.

The virtual slaughter across counters pushed the Sensex down by 4.53 per cent on the opening day of the new account on Monday in the wake of panic selling triggered by fears of a political crisis after the AIADMK decided last Saturday to forge a new alliance. The situation was further aggravated by the Cabinet's decision to reject Jayalalitha's newdemands.

Says BSE broker Dilip Bhat: "Indications of the fall of the BJP-led coalition at the Centre due to the recent developments led bulls to liquidate their commitments, resulting in the Sensex to fall massively. The major highlight of the day was that the FIIs were conspicuous by their absence. This resulted in operators and speculators having a field day. Tuesday's trading will depend on whether FIIs take a bearish approach or wait-and-watch attitude, which will determine the course of the market."

The market discounted the positive news on the exim policy front and also the expectations of fresh reforms in the forthcoming credit policy after the encouraging budget. Fears that the AIADMK would withdraw support to the BJP-led Government within a couple of days kept all positive sentiment at bay.

"The market opened with a gap and during the course of the day breached the 30-day moving average downwards at 3,570 points. The next support at 3,515 was also breached, which leaves the market vulnerableto further fall. The market is most likely to take support at the 3,400 level from where a brisk rally upwards is expected," said Apple Mutual Fund assistant vice-president Malay Sameer.

Even domestic financial institutions fell in line with bull operators and reportedly sold heavily in index heavyweight scrips like SBI, Reliance, Telco and Tisco.

"The market will stabilise only after the emergence of an encouraging political scenario as the fall of the present Government would jeopardise the finance bill and in turn, the reforms process," said a dealer at a foreign brokerage house.

In the specified group, 15 scrips including BPL, BHEL, Satyam Computers, Pfizer, Pentafour Software, Telco, E Merck, SBI and Siemens hit the lower circuit filter. Over 110 scrips in B1 and B2 also hit the lower circuit.

Satyam Computers was the top traded scrip with a turnover of Rs 245 crore among the total volume of business of Rs 1,559.62 crore. Other active scrips were Pentafour Software at Rs 219.38 crore, ITC at Rs128.31 crore, SBI at Rs 62.78 crore and RIL at Rs 57.18 crore.

Most of the software stocks hit the lower circuit with both Satyam Computers and Pentafour Software opening Rs 100 lower than its previous close. The fall in these stocks set the weak tone for the market with the others reacting in line with software leaders. Satyam Computers dropped by Rs 135.75 to Rs 1,564.25. Pentafour Software dipped by Rs 100 to Rs 1,151.