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Sensex sees historic fall

The 'Tragic Thursday' surpasses all previous record falls of over 560 points in May 2004 and April 1992., was triggered by proposal to levy higher tax on FIIs.

india Updated: May 20, 2006 16:43 IST

The Indian stock market on Thursday witnessed the worst bloodbath in its history, plunging by a huge 826.38 points, on fears triggered by a proposal to levy higher tax on FIIs coupled with the downturn in global metal and equity markets.

The 'Tragic Thursday' surpasses all previous record falls of over 560 points in May 2004 and April 1992. The index on Thursday settled at 11,391.43, down by 6.76 per cent from last close.

While the loss was initially confined to 600 points, Tata Steel's below-than-expected quarterly earnings dealt a severe blow pushing the index down to the day's low of 11,330.45 - registering an intra-day fall of 887 points.

An unperturbed Finance Minister P Chidambaram declined to comment on the cataclysmic fall, saying "everyday movement in the stock markets does not require a comment." Two days ago, he had termed the 462-point fall as a "technical correction".

Thursday's fall was triggered by the government's proposal to distinguish stock traders from investors for the purpose of levying tax.

The new draft guidelines distinguish shares held as stock-in-trade and shares held as investment to plug tax avoidance, particularly by FIIs -- which pay only 10 per cent tax on short-term capital gains. They will have to shell out 41 per cent tax, if they are treated as traders.

Also, taking a cue from the dip in US stocks and world-wide crash in metal prices, investors rushed with frantic sell orders right from the onset of trading.

Metal, cement and commodity shares plunged along with a number of blue-chip stocks as selling pressure became wide-based.

The NSE's Nifty tumbled by 246.20 points or 6.77 per cent to close at 3,388.90.