Mumbai: The overnight rally was short-lived and equities reacted substantially pulling the SENSEX down by about 26 points on the Bombay Stock Exchange (BSE) on February 7 on heavy selling by speculators as well as domestic funds in select counters.

Opening on a promising note at 3309.46, the BSE Benchmark 30-share Index later met with resistance and gradually moved downwards to the intra-day low of 3277.33 before ending at 3279.77 as against yesterday's close of 3305.44, netting a fall of 25.67 points or 0.78 per cent.

The broad-based BSE-100 Index also fell by 11.71 points to 1623.81 from previous close of 1635.52.

Reacting to news about US President Bush's fresh warning of an American military attack on Iraq saying that the game was over for Baghdad, operators pressed heavy sales in select key counters like Satyam Computers, ITC, MTNL, RIL, Infosys Tech, HLL, Grasim Ind, BHEL, Bajaj Auto, ACC and many second-line stocks, brokers said.

Barring a few software counters like Geometric Software and Mphasis BFL that notched handsome gains on speculative buying, most of the other IT stocks bore the brunt of selling pressure and showed marked falls.

Foreign Institutional Investors (FIIs), which have made net purchases of Rs 221 crore in the first three sessions, were believed to have drastically slowed down activity.

Kotak Mahindra continued to be the star performer on news that the company has got banking licence from the Reserve Bank of India.

PTI