According to market sources, the block deal happened soon after the opening of the market in various trades in the price range of Rs 1,313-1,341 a share.
The government is expected to garner over Rs 5,500 crore through the sale of 4.2 crore shares or 9 per cent stake.
Specified Undertaking of UTI (SUUTI), formed in 2003 is an offshoot of erstwhile UTI, held 20.72 per cent in Axis Bank. Pursuant to the deal, SUUTI's holding will come down to 11.72 per cent.
Shares of Axis Bank fell to the day's low of Rs 1,313.25, down Rs 44 a piece or 3.21 per cent over previous close. Over 4.92 crore shares of the bank changed hands in the early hours of trade today.
"The stock will bounce back on strong fundamentals of the bank. There was demand in the counter and now with the stake sale supply has come," CNI Reserach CMD Kishore P Ostwal said.
Yesterday, the merchant bankers had initiated the process of stake sale and had fixed a price band of Rs 1,290-1,357 a piece for the deal.
The government as per the revised Budget estimate expects Rs 3,000 crore from divestment of residual government stake in private sector companies in the current fiscal ending March.
Block deal is a trade with a minimum quantity of 5 lakh shares or minimum value of Rs 5 crore executed through a single transaction on this separate window of the stock exchange.
SUUTI in January had appointed three merchant bankers -- J P Morgan, Citigroup Global Markets and JM Financial -- for sale of its stake in Axis Bank.
Sources said there will be a six month lock-in period following the share sale.
The other promoters of the bank are Life Insurance Corporation, General Insurance Corporation, New India Assurance and National Insurance Company.