The rupee falling to a four-month low in early trade on heavy capital outflows over expectation of a rate hike by the US Federal Reserve also came as a dampener to the market sentiment. The move can potentially lead foreign portfolio investors (FPIs) away from emerging markets such as India.
The Nifty tested 10,000-mark as well during the day's trade.
Among BSE sectoral indices, metal index plunged 2.07 per cent, followed by oil & gas 1.63 per cent, PSU 1.63 and realty 1.58 per cent.
Sentiment was also hurt on concerns that the government's plan for a stimulus to halt an economic slowdown may have a negative impact on the fiscal deficit, Reuters reported on Thursday citing two government sources.More news: Eurozone private business growth picks up: PMI
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The Sensex and Nifty fell on Friday following nervousness in global markets as investors turned cautious following new United States sanctions targeting North Korea and a China credit rating downgrade.
The Indian government is considering a plan to loosen the fiscal deficit target so that it could spend an additional Rs 50,000 crore ($7.7 billion) in the financial year ending in March 2018.
In terms of the broader markets, the S&P BSE mid-cap index tanked by 2.71 per cent and the small-cap index by 2.93 per cent. While, domestic institutional investors (DIIs) bought shares worth a net Rs 1,416.55 crore, as per provisional data.
However, an upsurge in pharma heavyweights like Dr. Reddy's Lab, Lupin, Cipla and Sun Pharma aided to trim some losses. "The rupee fell to a almost six-month low of 65.14 against the USA dollar - its lowest since April this year", Desai added.
Major Sensex losers were: Tata Steel, down 4.70 per cent at Rs 654.55; Larsen and Toubro, down 3.49 per cent at Rs 1,184.90; Reliance Industries, down 2.83 per cent at Rs 817.50; ICICI Bank, down 2.77 per cent at Rs 277.10; and Hero MotoCorp, down 2.59 per cent at Rs 3,788.15.