The reason: heavy buying in index stocks by financial institutions on the last day before the VSNL issue pricing, which could boost sentiments, and did--but not enough to remotely influence pricing of the crucial VSNL GDR offer.

In New Delhi, communications minister Jagmohan (See Box) clearly stated the government's refusal to shift from a position that would allow only cash-rich promoters to survive the February 15 deadline, and possibly even allow them to buy out a few competitors. The market took little notice of the vital drama that will shake out the telecom sector in the comingmonths.

But it did not relent on VSNL itself: the pricing in the local book, to be declared on Friday, is believed to be a dismal Rs 765 to Rs 800. FIs led by Life Insurance Corporation of India (LIC) and State Bank of India (SBI) bailed out VSNL's local GDR book-building offer. Merchant banking sources said that LIC and SBI put in bids for seven lakh shares, and SBI and GIC subsidiaries (State Bank of Saurashtra and the four GIC subsidiaries) have also been drafted on to the rescue team with bids of one lakh shares, in a virtual repeat of the bailout effected in the cases of Gas Authority of India Ltd and Concor. VSNL had offered one million shares in the domestic market and 10 million shares in the overseas market.

The market hammered India's international telecom super-carrier's stock down to Rs 675 at close on the Bombay Stock Exchange (BSE).

There was some cheer for the issue in the international market, with sources close to the syndicate indicating a marginal oversubscription. Continued onHowever, the price at which the bids are coming in is in the range of $ 8.50 to $ 9.50, which could lead to a pricing of about $ 9.30 per GDR (two of each is worth an equity share). The GDR price for VSNL on Wednesday afternoon was $9.60 at the London Stock Exchange, a horror story compared with high hopes a week ago of a $12 price range per GDR. The final pricing is expected to be announced by VSNL late on Thursday. The VSNL top brass, sweating it out abroad in pursuit of investors, was in constant touch with their Mumbai office on Wednesday, but no one was available for comment. "The response was not all that encouraging expect in the United States", a source dealing with the issue said.

The international offering is being lead managed by Credit Suisse First Boston and Solomon Brothers while the domestic offering is being managed by Kotak Mahindra and SBI Capital Markets. Meanwhile, bears tightened their grip on the VSNL counter even as the lead managers made hectic attempts to place the stock at apremium to the local price on Wednesday afternoon. On the domestic front, the stock registered a price erosion of 4.93 per cent to close at the day's lowest bid of Rs 675 with a volume of 20,508 shares. On the National Stock Exchange the stock closed slightly higher at Rs 681.90 registering a decline of 3.5 per cent .However the VSNL GDR ( two GDRs = one equity) was traded at $ 9.60 witnessing a marginal decline of 0.78 per cent over Tuesday's close.

The sharp fall in the underlying stock price led to a sharp rise in the premium at which the GDR has been trading on the London Stock. The premium has now expanded to 20.75 per cent from 15.12 per cent registered on February 9.