There is also widespread fear that the new government which takes over at the Centre would hike fuel prices to reflect the sharp rise in world oil prices. ``A hike in petro products prices will lead to a general rise in prices. Transport costs would go up,'' analysts said.

With this, Sensex had lost nearly 190 points in the last three sessions. On Thursday, Sensex opened slightly higher at 4672.07 but later met with resistance and gradually moved downwards to dropped below 4600 mark to finish at 4571.09 with a sizeable loss of 89.95 points compared to the previous level of 4661.04. The BSE-100 index dropped by 33.70 pointsto 2089.82 from previous close of 2123.52.

An exit poll by state television, broadcast on Wednesday, projected the BJP and its allies would get more than half of the seats in which voting has been completed. The poll forecast the alliance would win 145 out of 268 seats while the opposition Congress party and its allies were likely to take 105 seats. Market participants said there was a political overhang in the market as many felt the numbers indicated only a slim victory for the BJP.

Most institutional investors have moved to sidelines, preferring to wait for the results of the ongoing general election due to end in early October. Foreign institutional investors (FIIs) had pulled out $ 60.8 million (around Rs 264 crore) from the Indian markets in the last 10 trading sessions. ``No doubt Indian stocks have been among the best performing in Asia this year, driven by an industrial revival and strong earnings growth. We will wait and watch till the elections are over,'' said a fund manager.

Speculatorsalso preferred to wind up their positions to avoid the additional margin requirements effective on positions carried forward to the next settlement. Institutions were reportedly pressing sales in public sector undertakings (PSUS) like BHEL, Indian Oil, MTNL and some others. However, FIIs continued their purchases in software shares and were net buyers in Infosys Technologies and Zee telefilms which closed at a new record high.

Of the total 153 specified shares, 123 registered heavy to marginal losses while 29 gained and one remained steady. Zee Telefilms was the most active scrip with a turnover of Rs 217.09 crore of the total volume of business of Rs 1610.28 crore.