Sensex sheds 268 points to close at 11,647

Profit-taking & NSE hiking derivatives margin were key causes.

Weighed down by speculative unwinding and profit booking by foreign funds, stocks fell for the third consecutive session on Tuesday, ending over 2 per cent lower.

The BSE Sensex plunged 268 points to close at 11,647, losing nearly 400 points in the first two days of this week. The NSE Nifty ended 86 points lower at 3,463.

The increased volatility on the bourses over the past couple of weeks has raised concerns that the long-awaited correction is already under way.

The NSE's announcement on increasing the derivatives exposure margin combined with the forecast of less than normal rainfall are seen to be the reasons for Tuesday's downfall. The NSE had yesterday announced an increase in derivatives exposure margins.

"However," said Amit Rane, analyst, Sykes & Ray Securities, "The increase in the F&O margins will only have a temporary impact on the markets but, in the long term, concerns over high oil prices and corporate earnings will affect the market sentiments."

"The markets are at such a level that any small negative can induce selling," said Pankaj Karde, dealer, India Infoline.

"On Tuesday, both domestic funds and FIIs have booked profits. FIIs have been net sellers on Tuesday. But this is a healthy correction and should not lead to any cause for worry," he added.

Only two stocks among the Sensex constituents, HDFC Bank and Bhel, ended higher. While HDFC Bank closed at Rs 825.60, up 0.46 per cent, Bhel closed at Rs 2,331.10, up 0.43 per cent.

Among the Nifty constituents, HDFC Bank and Hindustan Petroleum Corporation were the only stocks to end on a winning note.

Among the sectoral indices, BSE Metal was the biggest loser on Tuesday followed by BSE Automobiles. While the metals index was down 2.9 per cent, the auto index lost 2.61 per cent.

Essar Steel led the slide in metal stocks, down 7.05 per cent at Rs 52.75 and SAIL, down 5.38 per cent at Rs 81.85. The only exception being Hindustan Zinc, which rose 12.38 per cent to close at Rs 897.55.

HPCL and IOC were the only gainers in the oil and gas index. HPCL showed a rise of 1.02 per cent and closed at Rs 318.05. IOC on the other hand gained just 0.61 per cent to end at Rs 535.40. Cement stocks too lost significant ground on Tuesday. Grasim Industries shed 3.27 per cent to end at Rs 2299.65. ACC lost 3.53 per cent and closed at Rs 922.90.

Pharmaceutical stocks Cipla, Ranbaxy Laboratories and Dr. Reddy's Laboratories lost 4.73 per cent, 3.84 per cent and 1.90 per cent, respectively to close at Rs 247.70, Rs 480.65 and Rs 1434.10.

Automobile majors Tata Motors and Maruti Udyog lost 4.23 per cent and 3.49 per cent, respectively. While Tata Motors closed at Rs 917.05, Maruti Udyog closed at Rs 867.50.

Software stocks across the board closed in the red on Tuesday. HCL Tech was down 4 per cent to close at Rs 593.45. Infosys closed at Rs 3,147.20 after losing 1.77 per cent. MphasiS BFL, Satyam, TCS and Wipro too closed lower.

VSNL, Dabur India, HCL Technologies, Punjab National Bank, GlaxoSmithKline, ABB, Tata Tea, Sun Pharmaceuticals, Nalco, Tata Chemicals, Shipping Corporation of India and Mahindra & Mahindra lost between 2% and 4% on Tuesday.

Bharat Petroleum Corporation, Zee Telefilms, GAIL India, Jet Airways and Oriental Bank of Commerce too finished in the red with marked losses.

Overall, the declines outnumbered advances by a ratio of 1.4 to 1 on the BSE.