The 30-share BSE Sensex plunged 615.22 points, or 3.96%, to settle at 14,935.77. This was the third biggest single-day point fall in the Sensex ever.

The biggest single-day point fall of 826 points had occurred on 18 May 2006. Fears that a possible change in taxation laws on sale of shares would raise tax-liability for foreign funds (FIIs) had triggered the sharp fall on that day.Margin calls had accelerated the decline.

The second biggest fall of 617 points took place on 2 April 2007 following the Reserve Bank of India's (RBI) surprise hike in interest rates announced after trading hours on 30 March 2007. RBI had raised its short-term lending rate, the repo rate, by 25 basis points (bps) to 7.75%. It had also raised its cash reserve ratio (CRR) by half a percentage point.

Today’s fall was triggered by a setback in Asian and European markets. Asian and European markets tumbled today, 1 August 2007, as investor concern flared over the extent of the fall-out in the US subprime lending market, triggering widespread risk aversion.

In Asia, key benchmark indices in China, Hong Kong, Japan, South Korea, Singapore and Taiwan were down by between 2.1% to 4.2%. In Europe, key benchmark indices in London, Germany and France were down by 1.5% to 2%.

American Home Mortgage Investment Corp., a large US mortgage provider, said on Tuesday, 31 July 2007, it may have to liquidate assets, fuelling fears that the US housing slump was broadening and sending stocks reeling around the world. Bear Stearns Cos. Inc said on Tuesday, 31 July 2007, it had halted redemptions in a third hedge fund after investors wanted to pull out their money.

The fall was broad based. All the sectoral/niche indices on BSE declined. The biggest loser in percentage terms was the BSE Realty index, which lost 521.54 points, or 6.6%, to 7,332.51. The BSE Metal index tumbled 559.64 points, or 4.8%, to 11,071.28. The BSE Capital Goods index lost 624.37 points, or 4.69%, to 12,697.41. The BSE Oil & Gas index tanked 357.85 points, or 4.4%, to 7,772.65.

The BSE Small-Cap index lost 294.73 points, or 3.6%, to 7,775.90. The BSE Mid Cap index lost 256.62 points, or 3.8%, to 6,461.46.

This means the fall was spread across the spectrum: large, mid and small caps.

The major losers among small-cap and mid-cap shares were Shah Alloys (down 18% to Rs 62.45), Sanghi Industries (down 13% to Rs 69.95), Sical Logistics (down 12% to Rs 245), RK Forgings (down 11% to Rs 182.20), Indus Fila 9.98% to Rs 195.25, Time Technoplast (down 15% to Rs 513.50), India Infoline (down 11.9% to Rs 662), Entertainment Network India (down 11% to Rs 462), Teledata Informatics (down 10% to Rs 64.65), and NIIT (down 9% to Rs 980.35).

Select stocks survived the fall. United Phosphorus (up 4% to Rs 319.50), Ingersoll Rand (up 2.2% to Rs 345), Kansai Nerolac Paints (up 2.8% to Rs 719.95), 3M India (up 2.6% to Rs 1858), and IPCA Lab (up 1.7% to Rs 715) edged higher.

The market has witnessed a seesaw movement of late. Firm global markets led the Sensex to surge 290 points on Tuesday, 31 July 2007, as the market shrugged off a 50 basis-point hike in CRR by RBI announced on that day. The market also took solace in that RBI had kept interest rates steady.

Tuesday’s recovery was strong coming against the backdrop of Friday, 27 July 2007’s sharp 542-point fall that was caused by setback in global equities. Stocks tumbled in Asia and the US on that day as an avalanche of concerns over the US credit and housing markets spilled into other areas of the financial sphere and prompted investors to reduce risk.

The current fall on the bourses comes after a recent solid surge as FIIs stepped up buying on strong Q1 June 2007 corporate results. From 14,003.03 on 13 June 2007, the Sensex had risen 1,791.89 points, or 12.7%, to 15,794.92 on 24 July 2007.