The slide show is back for markets as the benchmark BSE Sensex tanked over 562 points to 25,201.90 -- its weakest closing in nearly 14 months -- amid lacklustre global cues following caution over US payrolls data.
A strong set of non-farm jobs numbers, analysts say, is expected to cement Fed's stance for a rate hike in September.
The prospect of a higher US rate, which leads to risk aversion in riskier assets, has so far roiled the scene in emerging markets, which have run up massive losses of late.
The signals from Europe that it's willing to shore up its economy were not enough to assuage the fears of foreign investors.
The rupee, at 66.46, lost some muscle against the dollar, which fed the fears further.
In weekly terms, the Sensex turned weaker by 1,190.48 points, or 4.51 per cent, and Nifty retreated 346.90 points, or 4.33 per cent. This is the fourth straight weekly plunge for both the indices.
The 30-share index remained off-colour for a major part of the day and touched a low of 25,119.06 before ending at 25,201.90, a steep fall of 562.88 points, or 2.18 per cent.
The broader NSE Nifty too came under all-round selling and slipped below the crucial 7,700-mark to settle lower by 167.95 points, or 2.15 per cent, at 7,655.05.
"Indian indices remained under pressure primarily on account of the sustained global risk-off trend. Concerns with respect to the Chinese economy slowdown and the stance of the US Fed continued to affect investor sentiment," said Hitesh Agrawal - Head, Research, Reliance Securities.
The red mark stood out as 28 of the 30-share Sensex pack fell.
Vedanta sank the most, down 4.84 per cent, followed by GAIL, Tata Steel and Hindalco.
Talking of sectors, BSE realty bled the most by plunging 3.32 per cent while infra, power, banking and healthcare too contributed to the fall.
In broader markets, small-cap and mid-cap indices closed lower by 2.47 per cent and 1.90 per cent, respectively.
Elsewhere in Asia, Japan's Nikkei fell 2.15 per cent and Hong Kong's Hang Seng shed 0.45 per cent while Chinese markets remained shut on Friday.
European markets were in deep red in anticipation of a strong US jobs report.
"Comments coming out of G20 meet of finance ministers and central bank governors may also set cues for next week?s opening," said Anand James, Co Head Technical Research Desk, Geojit BNP Paribas.
Foreign investors continued to pull out of equities as they net sold shares worth Rs 394.31 crore yesterday, according to provisional data.
The market breadth turned negative as 2,116 stocks ended lower, 574 stocks closed higher while 89 stayed flat. The total turnover rose to Rs 2,689.66 crore, from Rs 2,362.85 crore on Friday.
"This is a good opportunity to invest in quality stocks.
In the medium term, we have room for further 50 bps cut in interest rate by the end of the year, adjusted to the US rate hike expectation and a likely intervention by China/EMs governments to stimulate the economy," said Vinod Nair, Head-Fundamental Research, Geojit BNP Paribas Financial Services.
"The sectors we should focus on are IT, pharma, auto, consumer durables, private banks and infra," he added.
Rupee slides too
Continuing to fall for the second consecutive day, the rupee declined by 22 paise to settle at 66.46 against the US dollar on persistent demand for the American currency from banks and importers amidst foreign capital outflows.
Besides, a sharp fall in equity markets affected the rupee value against the dollar.
The rupee opened higher at 66.16 against on Thursday's closing level of 66.24 at the Interbank Foreign Exchange (Forex) market and firmed up further to 66.10 on initial dollar selling by banks.
However, it declined sharply to 66.52 on fresh demand for dollars from banks and importers before concluding at 66.46, showing a loss of 22 paise, or 0.33 per cent.
The rupee has dropped 27 paise, or 0.41 per cent, in two days.
It moved in a range of 66.10 and 66.52 during the day.
Globally, the US dollar was higher against its major rivals in early Asian trade after the European Central Bank gave a sobering assessment of the Eurozone economy and suggested that it may have to beef up its already massive stimulus programme.
However, the US dollar index, which tracks the greenback against a basket of six major rivals, was up by 0.15 per cent.
Oil prices edged lower in cautious Asian trade today as investors await the release of a US jobs report for August that could determine the Federal Reserve's time-table for hiking interest rates.
Meanwhile, the benchmark BSE Sensex tumbled by 562.88 points, or 2.18 per cent, to settle at 25,201.90 today.