This massive downturn has virtually wiped out all the gains which resulted from finance minister Yashwant Sinha's ``feel-good'' Budget on Wednesday.

Aided by rumours of an impending payment crisis on the markets and concerns of a cut in orders from US infotech companies on Indian IT firms, a wave of selling pressure gripped the markets with most major stocks witnessing selloffs.

On Friday, the last day of settlement on the BSE, the market opened marginally higher in the morning, but selling across the board in the afternoon pulled down the market. The mood in the market was so depressed that market players completely ignored the positive impact of the 50 basis points (bps) Bank Rate cut announced by the Reserve Bank of India on Thursday after market hours.

Dealers said the selling was led by some top US-based funds who are believed to be reallocating their portfolios from new economy stocks to brick-and-mortar companies.

Opening higher at 4323.18 in the morning, the Sensex touched a high of 4341.67 during the day, before crashing to close at 4095.16, down 176.49 or 4.13 per cent during the session. The S&P CNX Nifty, the National Stock Exchange's benchmark index, was also down sharply in tandem, dipping 51.7 points to close at 1306.35.

The sharp downturn in tech stocks on Friday was amply evident from the movement of the BSE IT index, which plunged 358.19 points, or 13.96 per cent, to close at 2207.46 at the end of the day's trading.

Among the worst hit stocks in the market were index heavyweight Satyam Computer, which hit a 52-week low and the maximum lower circuit of 16 per cent to close at Rs 262.65, followed by software giant Infosys Technologies, down 13.07 per cent to hit a new 52-week low of Rs 4901 before closing marginally higher at Rs 4939.85.

Other infotech stocks which took a severe beating were: NIIT, which also hit its 52-week low of Rs 982.80 before closing marginally higher at Rs 1014.80, SSI (down 16 per cent), HCL Infosystems (also down 16 per cent), Aptech and Silverline Technologies, while Wipro, which is the leader in terms of market capitalisation, shed a hefty 14.11 per cent to close at Rs 2078.95.

``It was complete panic selling on fears of a cut in IT spending by the US companies and the other rumours doing the rounds of the market,'' said Mr Abhay Aima, country head (equities), HDFC Bank. Mr Divyesh Shah,a dealer with Refco-Sify Securities, said the market was ``rightsizing'' the new economy stocks in accordance with their face value, especially for stocks which have recently gone in for stock splits.

There were also fears in the market that some of the top broking firms had defaulted in payments of margins to the stock exchanges and that their trading terminals had been deactivated.

Besides, rumours have been doing the rounds over the past few days that a leading bull operator who had borrowed huge funds from a leading private sector bank which was in the news recently, had defaulted on his obligations, following which the bank was dumping his holdings in new economy stocks to recover its dues. In an otherwise bad day, some bright spots were seen in stocks like Bank of Baroda, which was up 13.3 per cent to close at Rs 74.95, BPCL up 11.55 per cent at Rs 204.80 and HPCL up 5.72 per cent at Rs 187.60.