While the overseas GDR market fell by 7.21 per cent, prices of government securities fell by 20-30 paise across all maturities as the panic in the forex market spilled over to the securities market as well. Silver prices also crashed on the bullion market.

Panic gripped the forex market following reports that the World Bank has postponed fresh loans to India. Opening the day at a wide 41.25/41.30 - lower from its previous close at 41.17 - the rupee was seen at 41.40 soon thereafter, moving downwards to hit its historic low of 41.50. Dealers said that a few trades were done at this level. Banks were seen squaring up at this point. It closed at a marginally higher level at41.35 after SBI sold dollars.

SBI reportedly sold dollars at 41.35-41.40 levels, dealers said. State Bank officials in Calcutta, however, denied any such action. In the forwards segment, the six-month annualised forward cover ended weaker at 9.29 per cent as against its Tuesday's close at 9.13 per cent.

``There was sustained corporate demand for dollars throughout the day, but there was no panic as such,'' said Global Trust Bank's treasury head, Anand Anjan. Others like Standard Chartered Bank's chief dealer-forex, Sharukh Wadia said: ``Trades were volatile... things turned calmer after the Reserve Bank made enquiries and State Bank made spot dollar sales.''

Dealers said the World Bank move will have a cascading effect and foreign exchange inflows would come down. The downgrading of India's outlook by Standard & Poor's has already cast a shadow on the rupee. Sources close to RBI said the central bank is unlikely to intervene in the market in any manner till the presentation of the budget. "The budgetwill play a crucial role in deciding the movement of the Indian currency. The RBI will not try to defend the rupee at any level now as that will add to the panic," sources said.

On the other hand, pivotals led by ITC crashed on the BSE and the National Stock Exchange (NSE) today on nervous unloading by FIIs and others due to a host of concerns including loan sanction delays by the World Bank, a falling rupee and a possibly tough budget. Software shares, however, gained ground as the rupee fall is expected to benefit software companies.

The overseas GDR market also took a heavy beating. Skindia GDR index crashed by 7.21 per cent to touch its 52-weak low of 762.84. The fall in Indian and other Asian markets contributed to the fall in GDR prices. Indo Gulf and Crompton Greaves GDRs lost 20 per cent each.

On the BSE, the sensitive index fell below the psychological barrier of 3800 and closed at 3777.19 with a sizeable loss of 97.87 points against the previous close of 3875.06. Sensex has shed 130.72 pointsin the last two trading sessions. According to a BSE director, the sentiment was affected on fears that the government will have to resort to harsh measures in the budget to keep control on the economy.

Silver prices too drop sharply

MUMBAI: Silver prices dropped sharply on the bullion market today following the steep fall in the value of the rupee. The sentiment was also adversely affected by weak European markets where both the precious metals nosedived on selling triggered by the strong dollar and collapsing Asian stock markets.

Silver (.999 fineness) and tenderable silver slumped by Rs 29 each to Rs 7,440 and Rs 7,445 respectively. Raw silver was down by Rs 285 to Rs 7,335. Standard gold softened by Rs 35 to Rs 4150 and 22-carat gold was down at Rs 3,840 from Rs 3,870 yesterday. Ten-tola gold bar (.999 purity) dipped by Rs 400 to Rs 48,700.