Nifty slumps on record volumes, closes below 4850

The markets witnessed the biggest single day fall since August 17, 2009 on the back of the Reserve Bank of India's (RBI) hawkish credit policy. Huge shorts build up and weak global cues also weighed on the markets. The Sensex plunged 387 points while the Nifty touched the 50-DMA (daily moving average) of 4,837 during the day on huge volumes.

The markets recorded the third highest total turnover ever at Rs 1.46 lakh crore while clocked highest F&O turnover ever. The sell-off was seen across all the sectors; realty, banking, metal and telecom stocks were worst hit in today's trade.

The benchmark indices started the day on a weak note following weak Asian and US cues. Among Asian markets, Shanghai lost 2.8% and Hang Seng fell 1.9%. Nikkei and Jakarta slipped 1.5-1.7%. Straits Times and Kospi declined 0.5-0.8%.

Taiwan Weighted was down just 0.14%. The US markets ended 0.6-1.2% lower on Monday, on the back of fall in financial and commodities' related shares. European markets and the US index futures were flat in trade, at the time of writing this report.

Today's fall could be attributed to RBI's credit policy. RBI tightened NPA (non-performing asset) norms for banks and increased real estate provision to 1% from 0.4%. It also revised inflation target to 6.5% from 5% for March 31, 2010. It kept CRR (cash reserve ratio), Repo and Reverse Repo rate unchanged while hiked SLR (statutory liquidity ratio) to 25% from 24%.

Banking and realty stocks witnessed huge selling pressure; respective indices fell 3.8% and 6.2%. CNBC-TV18 analysis showed that banks may need higher provisioning over next four quarters. SBI and ICICI currently have 50% coverage ratio; SBI may require additional provisioning of Rs 3,800 crore and ICICI Bank may require additional provisioning of Rs 1600 crore. SBI tumbled 4.5% and ICICI Bank lost over 6%.