The last trading day of the financial year saw the Sensex and the Nifty tank by more than 4 per cent as a new development added to the negative news that had piled up over the weekend.

A directive from the Institute of Chartered Accountants of India that companies disclose their mark to market losses in derivatives transactions in the forex market was hugely negative for stocks, said stockbrokers.

This directive comes close on the heels of a 13-month high inflation figure and two successive days of a negative close for the US markets which saw Asian markets in the red on Monday.

The ICAI directive has been negative for the market, although its a good move that will bring in transparency, Mr Ajay Bagga, CEO of Lotus India Mutual Fund said. The market is worried about the derivative losses of companies; now that they have to disclose it as well adds to the anxiety. Also reports of a slow down in the US technology sector have affected market sentiment, said Mr Satish Ramanathan, Head of Equities, Sundaram BNP Paribas Mutual Fund.

As for the high inflation figure, it has been confirmed that price rise is an issue and growth may have to be contained, said Mr Bagga. Quite a few foreign brokerages have lowered their estimate of the Indian growth rate to less than 8 per cent. There could be some strong monetary measures too in the offing.

Monday was also the last trading day of the fiscal for mutual funds to shore up the net asset value (NAV) of their schemes. There was evidence of this as domestic institutional investors were net buyers for Rs 566.03 crore. FIIs were net sellers by Rs 865.79 crore as per the provisional data from the stock exchanges.

The Sensex tripped 808 points intra-day, finally closing at 15,644 points, down 4.44 per cent or 727 points. The Nifty closed at 4,734, lower by 4.20 per cent. However, the Sensex gained close to 20 per cent in FY08 with a gain of 2,572 points from its March 30, 2007 close of 13,072. There were positives in Mondays bearish market too as overall market breadth was in favour of the gainers, 1,365 stocks advancing against 1,291 scrips declining.

The banking and financial services stocks were worst affected, the BSE Bankex index dipped 5.89 per cent. The BSE IT index was the second highest loser, falling 5.60 per cent. All the other industry indices too closed in the red. Healthcare, automobile and FMCG were the least hurt.