After the market re-opened at 10.55 am on Tuesday, Anil Anand (name changed), a retail investor working in a bank in Churchgate, called his broker to ask him to buy 100 shares of Reliance Communications [Get Quote].

The broker said he would take the order only if the cheque was handed over in two hours. This in itself is unusual, but brokers obviously are not taking any chances.

Anand had to travel to Borivali just to deposit the cheque. After all, when would Reliance Communications be available for Rs 500 a share?

If good stocks were available at throwaway prices, penny stocks found no takers. For instance, Hari Gundecha faced a strange dilemma. He had made profits, buying into Harig Crankshafts [Get Quote] when the stock was quoting at Rs 1.30 a share but he could not exit the stock on Tuesday. The stock had run up to Rs 7.61 a share and was quoting at Rs 4.48 a share on Tuesday.

After the market began trading again, panic took the form of heavy distress selling of pledged or warehoused stocks in a desperate attempt to limit their losses or meet payment obligation of exchanges.

Harried after a hard day's trading on Monday, brokers had no respite.

After 7 pm on Monday, even as brokers were on their way home, the exchanges decided to increase the margin limit.

Not surprisingly, at 9.56 am on Tuesday, the BSE Sensex was down 9.75 per cent to 15,888.94 points.

What many had not bargained for was that the index-based circuit filter would be triggered so soon after trading began. The exchanges closed several member terminals since brokers could not fulfil the margin requirement. 

With the bloodbath continuing on Dalal Street [Get Quote], Gujarati retail investors have felt the heat too. Gujarat, which accounts for around 14 per cent of the country's stock market cap, was one of the biggest losers.

In Ahmedabad, Vijay Zala, a retail investor, found that his neighbourhood broking branch office simply refused to part with shares even at low prices.

"They refused to entertain any retail investors citing limit closures from their head offices," said Zala.

The market fall also took a heavy toll on small stock brokers who had been offering incentives to investors in the form of nominal margins on recovery.

"Deferred nominal recoveries are now no more to be seen after the market crash.  Such problems in pay-in-pay-out may not be likely at exchange levels but are possible at broker levels," said a broker.

"Investors can't understand. The India story is intact. So what is causing the markets to fall?" asked Anita Gandhi of Arihant Capital Markets [Get Quote].

Some may be listening to her. Brokers got a few buy orders from retail investors when the market tanked in the morning.

Towards afternoon, stock counters began to see some more stray buyers even as the Sensex clawed back. But it continued to ricochet wildly even as rumours flew that the exchanges would increase margin limits.

Result: investors queued up outside several banks to issue stop cheque instructions in an effort to retrieve their money put into the Reliance Power IPO.

Additional reporting: Ila Parikh in Ahmedabad