Domestic and global negative factors weighed heavily on the bourses as both the benchmark indices, S&P BSE Sensex and the CNX Nifty, tanked sharply and ended at four-month lows following across-the-board sell-off, extending their losses for the second straight week.
The 30-share Sensex plunged by about 692 points, while 50- scrip Nifty nosedived 221 points to register their biggest weekly fall in the current calender year.
The Sensex posted its biggest weekly fall in absolute term since second week of December 2011 when it had plunged by 722.11 points, or 4.45 per cent, and the Nifty since third week of November 2011 when it had slumped by 263 points or 5.09 per cent.
Hammering was so strong that 12 out of 13 sectoral indices closed in the red, losing between 13.04 per cent and 1.32 per cent. Realty, PSU, power, metal, capital goods, refinery, auto and banking segments bore the brunt of investor fury.
Markets closed in negative terrain on all the five trading days of the week.
Trading commenced the week on a bearish note with a sharp downside gap of over 140 points on fears of a fresh eurozone debt crisis after Cyprus said it was planning to tax bank deposits as part of a 10 billion euro ($12.9 billion) sovereign bailout deal.
The news from the tiny Mediterranean country, a member of the eurozone, rattled the global markets and its tremors were felt in faraway India too.
On March 16, Cyprus got euro 10 billion package from lenders but planned to impose a one-time levy on money held in the island's bank accounts as part of the sovereign bailout.
Business-friendly Cyprus has treaties on double taxation with many nations, making it attractive for investors.
The sentiment worsen further on the second day, after DMK withdrew support to the Congress-led UPA Government over the issue of alleged human rights violations of Tamils in Sri Lanka. The political development overshadowed the positive atmosphere created by RBI's rate cut on March 19.
Five Union Ministers of the DMK, which was UPA's biggest coalition partner after the Congress, handed over their resignation to the Prime Minister over the Lanka issue.
The pullout by the Tamil Nadu-based party raised concerns about the stability of the Manmohan Singh Government and the fate of key reform bills related to pension and insurance which are pending in Parliament.
Finance Minister P Chidambaram quickly stepped in to calm investor fears and asserted that the UPA Government enjoyed majority and it was "absolutely stable". However, Chidambaram's assertion failed to convince a nervous market, which continued to reel under heavy selling pressure.
Experts said markets reacted cautiously to RBI's rate cut as the sentiment was adversely hit by Reserve Bank's statement that scope for future rate cuts was limited.
The central bank, in its mid-quarter monetary policy meeting on March 19, cut short-term lending rate, or repo, by 0.25 per cent to boost economic growth.
The market turned choppy on the last day of the week, moving in and out of positive terrain, as the European Central Bank on Thursday issued a deadline to Cypriot Parliament for meeting the terms of the proposed bailout.
The Bombay Stock Exchange gauge, Sensex, after resuming lower, continued its downward march and closed at 18,735.60, a level not seen since November 26, 2012 when it ended at 18,537.01, posting a hefty fall of 691.96 points, or 3.56 per cent. Last week, the index had tumbled 255.67 points, or 1.30 per cent.
Similarly, the NSE 50-issue CNX Nifty moved in a range of 5,863.60 and 5,651.35 before concluding the week at 5,651.35, a fall of 221.25 points, or 3.56 per cent. The NSE benchmark had ended at 5,635.90 on November 26, 2012.
Meanwhile, Foreign Institutional Investors (FIIs) continued their buying spree and picked up shares worth Rs 919.20 crore in the week, including provisional figure of November 22.
"Going forward, doubts will be raised in the minds of investors as to how government will go ahead with any reform process, whether disinvestment process will go through smoothly and reaction of FIIs," said Asit C Mehta Investment Interrmediaries AVP - Institutional Research K Subramanyam.
"Given the domestic political uncertainty, Cyprus crisis, next week being a truncated one on account of Holi and Good Friday and expiry of derivatives contract on March 28, market may enter into a consolidation phase," said Amar Ambani, Head of Research, IIFL.
Overall 28 out of 30 Sensex-based scrips closed with sharp to moderate losses while only FMCG majors ITC and HUL finished with gains. BHEL, Tata Steel, SBI, ONGC, Maruti Suzuki, L&T, Tata Motors, Coal India, Sterlite Ind, Hindalco, Tata Power, M&M, Bharti Airtel, HDFC Bank, NTper cent, RIL, ICICI Bank, Dr Reddy's Lab, HDFC, TCS, Gail India, Hero MotoCorp, Jindal Steel and Wipro ended down between 9.11 per cent and 1.15 per cent.
Among the sectoral indices, the BSE-Realty tanked by 13.04 per cent followed by S&P BSE-PSU 7.58 per cent, S&P BSE-Power 7.32 per cent, S&P BSE-Metal 6.87 per cent, S&P BSE-CG 6.79 per cent, S&P BSE-Oil&gas 5.24 per cent, S&P BSE Bankex 5.15 per cent, S&P BSE-Auto 4.80 per cent, S&P BSE-Teck 2.66 per cent and S&P BSE-CD by 2.22 per cent.
Selling was seen in second line counters by wary retail investors as S&P BSE-Smallcap and the S&P BSE-Midcap dipped by 6.58 per cent and 4.95 per cent, underperforming the sensex.