Despite being the first day of the settlement on the NSE, values showed a sharp drop. Strong selling was witnessed across the board, and stocks from old as well new economy lost heavily.

Among the index-based counters, HLL, ITC, Reliance, Infosys, Satyam Comp, Zee Tele, SBI came under strong selling pressure, and dipped sharply. In fact, stocks like L&T, Bhel dipped below 8 per cent circuit levels.

Meanwhile, the sentiment for the software segment was equally bearish. Almost all the software stocks showed a negative close. Global Tele, Dig Equipment, Pentamedia, and DSQ Soft declined sharply. The trading volume was comparatively low on the BSE. The BSE Sensex opened at 4672.19 points, touched a peak of 4721.85 points, and closed at 4715 points. The low for the day was 4604.54 points.

Meanwhile, the S&P CNX Nifty also lost 26 points and closed at 1437 points. The low for the day was 1432.85 points whereas the high unchanged.

Meanwhile, the trading volume on the BSE stood at Rs 3523 crore, and the same figure on the NSE was Rs 6335 crore.

Market players expect that whatever negative developments have taken place on the political front may not worsen further. The Prime Minister has not accepted the resignations of his ministers, all from the BJP ally Shiv Sena. ``We expect the negatives to be contained at this level only. We are keeping our fingers crossed,'' said a dealer with a local brokerage. On the FII investment front, considerable selling is reflected for the third consecutive day. For Tuesday, according to Sebi's investment figures, the foreign investors have sold equities worth Rs 255 crore.

This follows net outflow figures of Rs 204 crore on Friday and the all-time high outflow of Rs 460 crore on Monday. And dealers expect negative figures for Wednesday also.

FIIs have already sold net of purchases Rs 1121 crore in July so far. Since June to date the net sales by FIIs has been around Rs 2000 crore. According to a dealer with a domestic broking house, earlier the FIIs were selling in the ICE sectors, but over the last two days they have also sold in old economy stocks. ``This is not a very good sign as it has all the ingredients to further weaken the market,'' said the dealer.

Meanwhile, stocks which gained more than 7.9 per cent were LCC Info, Adam Comsoft, Vital Com, Nucl. Soft, Movilex Irr, Munjal Showa, Spanco Tele, Anuh Pharma. Other gainers for the day were UTI Bank, Mastek, Sharp Ind, Valiant Com, Magan Ind, Mirza Tan, Nat Peroxide, Mysore Cements, Varun Shipping, and Jindal Iron.

At the same time, stocks which dipped more than 7.9 per cent were Century, L&T, Bhel, Essel Packaging, Vikas WSP, GV Films, Kale Consult, Veronica Lab, Atcom, Datapro Info, Gemini Com, PCS, Alps Info.

Other losers for the day were Global Tele, Indogulf, Grasim, Bilt, Escorts, Ashok Leyland, Padmini Poly, ABB, Bom Dyeing, ITC Bhadra, India Cements, BPCL, Himalaya Int, P&G, Nirma, Kesoram.

Market players are a divided lot at the current moment. While some do not see much downside from the current levels, and expect buying to resume soon, technical analysts feel the market might go down further. According to Hiten Sampat at Parag Parikh Financial Advisory Services, ``we expect buying to resume soon and the market will bottom out at the current level.'' According to Sampat, FIIs themselves are likely to resort to fresh buying within the next few days.

However, technically, the market is spoiled, feels Jignesh Shah at Triumph International Finance. According to Shah, there is negative divergence and the index has penetrated out of wedge. ``So, it can move further down,'' said Shah. Scripwise, on Wednesday, a number of ICE stocks were looking good. Counters like NIIT, Infosys, Satyam Computers and HFCL put up good resistance. According to market players, for Satyam Rs 2730 looks a good resistance while for Himachal, Rs 1340 should be the stop-loss level.

However, as many as 16 stocks in the A group held firm with some of them posting marginal gains. Among these were select banking and financial sector stocks like ICICI, HDFC Bank, IDBI Bank and Global Trust Bank. Banking leader SBI however closed with a loss of Rs 7.40 at Rs 222.75.