Short positions on the BSE fell sharply from Rs 490 crore to a low of Rs 340 crore. It may be recalled that for the past two consecutive settlements, the short positions on the BSE were pegged above Rs 500 crore. The net long positions on the BSE fell by Rs 78 crore to Rs 941 crore.

The resurgence in domestic prices towards close spilled over into the GDR market, which rallied by 1.69 per cent to 680 points during mid-session. The GDR market is expected to make a strong recovery after Pakistan's retaliation shaved off 57 points or 7.86 per cent on Thursday. With the recovery in prices, the premium commanded by GDRs, which had eroded in Thursday's fall, is likely to berestored.

However, in a resurgent GDR market, the GDR of IPCL was hammered since the net profit of the company dipped by a whopping 87 per cent despite higher sales. The GDR was quoted at $6.50 during mid-session, down 3.35 per cent from Thursday's close of $6.71.

According to brokers, UTI once again donned the mantle of market saviour and pumped in nearly Rs 160-175 crore on the BSE today. The presence of UTI and other domestic institutions mirrored in the recovery registered at several frontline counters. UTI was also rumoured to have picked up select infotech stocks like Digital, PSI Data Systems, Aptech and Infosys Technologies. According to fund managers, infotech companies would benefit on account of the rupee depreciation.

``Rumour mongering finally took a toll on the market indices as bulls continued to liquidate their long positions. The correction towards the last phase was on account of intra-day squaring of positions and liquidation due to end of account considerations on the BSE,'' saiddirector of Churiwala Securities, Alok Churiwala. ``Technical positions reflect that unless the index finds support at 3,900 levels, a reversal cannot be expected. The market is currently facing crisis of confidence with bulls unwinding their long positions. However, we will re-enter the bull phase by the second week of June where the index should hover around 4,000 levels,'' added Ketan Desai, Nucleus Securities.

FIIs, especially the hedge funds, were rumoured to have sold off heavily at index-based counters. According to brokers, several FII brokerage houses were seen liquidating their holdings which were held in the form of participatory notes considering the tight stop-loss systems in place.

However, country and emerging market funds were rumoured to have taken a `wait and watch' stand, despite the uncertainties. ``Technically, since the Sensex has breached the crucial barrier of 3,690 levels, one needs to `wait and watch'. However in the long run, the 4,600 level cannot be ruled out,'' said NeelDalal, a BSE broker.

Leading FII brokerage outfit CSFB reported huge deals on the negotiated segment of the BSE at the counters of Cipla, HDFC, IDBI Bank, MTNL, and Reliance Industries. ITC once again dropped below the Rs 1000 mark to touch its intra-day low of Rs 977.50 but closed at Rs 1,015 in the final countdown.

Marketmen also see this correction as the right time for long-term investors to buy into the market. Says Vinay Bajpai at Khandwala Securities, ``The correction has provided ample opportunity for long-term investors to rebuild their portfolios in a selective manner. ``From today's level of 3,773, the index should not fall more than 10-15 points since these levels should see a lot of fresh FII funds pouring into the Indian bourses,'' adds Pramod P Shah of SPS Share Brokers.

Reflecting the rampant shortcovering on the BSE on end of account considerations, stocks like Reliance, SBI, Zee Telefilms and ACC closed with a premium on the NSE.