Persistent selling pressure in view of rising inflation and contraction in industrial production data pulled Sensex down by hefty 538 points to a near 4-month low of 16,298.98.
With this week's fall, the market completed straight three weeks of losing string.
Selling was seen across-the-segment as all 13 sectoral indices closed in the red between 0.5 per cent and 4.67 per cent.
Shares of power, IT, metal, realty, banking and healthcare sectors bore the brunt of heavy sell-off from operators and investors and ended with losses.
Only three - Bajaj Auto, BHEL and DLF - out of the 30 Sensex-based components closed with gains.
Fall in heavyweights like RIL, Infosys, TCS, Wipro, Tata, Steel, Jindal Steel, Coal Ind, Hindalco, Sterlite Ind, ICICI Bank, HDFC Bank, SBI, ITC, M&M, Tata Power, NTPC, Hero MotoCorp, Maruti Suzuki and Sun Pharma, mainly contributed to the Sensex's fall.
The benchmark Sensex recovered its early losses on the first day of the week and rose by 82 points on fag end buying after investors cheered Finance Minister Pranab Mukherjee deferring controversial General Anti-Avoidance Rules (GAAR) in Parliament to 2013/14, giving some sigh of relief to the foreign investors.
The government also halved the capital gains tax for private equity investors to 10 per cent and decided to withdraw the levy on all precious metal jewellery, branded and unbranded, with effect from March 17, 2012 with thresholding limit for TCS (tax collection at sources) on cash purchase of jewellery will be raised to Rs 5 lakh from the present Rs 2 lakh.