The 30-share Sensex ended at 19,428 down 142 points or 0.73% and the 50-share Nifty ended at 5,873 down by 36 points or 0.62%.
The Sensex and the Nifty reached an intra-day low of 19,383 levels and 5,861 mark, respectively.
On the global front, European stocks advanced to a four-and-a-half-year high as the region's policy makers gathered for a two- day summit in Brussels.
Assicurazioni Generali SpA rallied the most since May 2010 after Italy's biggest insurer reported increased operating profit.
HeidelbergCement AG soared to the highest since 2008 as debt declined more than estimated.
Deutsche Lufthansa AG climbed 3.7 per cent as Europe's second-largest airline agreed to buy aircraft from Airbus SAS.
The Nikkei share average closed at a fresh 4-1/2-year high above the 12,500-mark on Friday on growing expectations the central bank will ease monetary policy aggressively under its new leadership.
Japan's parliament approved Haruhiko Kuroda as the Bank of Japan's next governor and Kikuo Iwata and Hiroshi Nakaso to serve as the BOJ's two deputy governors.
Back home, BSE Realty index crumbled by nearly 3% followed by counters like Banks, Oil & Gas, Auto, Metal, Capital Goods, FMCG and PSU, all declining between 1-2%.
However, BSE Consumer Durable index surged by nearly 3%.
Private banking majors ICICI Bank and HDFC Bank were down 1-4% on profit taking at higher levels after gains in late trades on Thursday.
ICICI Bank was the top Sensex loser, down nearly 4% on back of heavy volumes on reports that the government is investigating the allegations of money laundering practices.
Among other Sensex losers Tata Motors was down 3% at Rs 291 and index heavyweight Reliance Industries was down 2% at Rs 844.
Kotak Institutional Equities maintains its "reduce" rating on Reliance Industries Ltd, saying investors are over-estimating the impact from a potential gas price hike and the value creation from its capital spending plans.
Shares of software exporters firmed up on the back of encouraging economic data from the US. Infosys was up 0.31% and TCS was up nearly 0.2%. Wipro was up by nearly 1%.
Motilal Oswal has a 'buy' call on Infosys.
The brokerage believes that 3QFY13 may only have been the first quarter of a visible momentum in the company's growth, and that there is further upside in the stock from current levels, Motilal Oswal said in a report.
Shares of cable operators such as Den Networks, Siti Cable Network and Hathway Cable and Datacom have rallied up to 6% in late noon deals on the Bombay Stock Exchange (BSE).
TV broadcasters and multisystem operators (MSOs) are gearing up to meet the deadline for mandatory switching from analogue to digital services in the National Capital Region and another 30-odd cities nationwide.
Among the individual stocks, Siti Cable Network, Den Network, Hathway Cable and Datacom were up 4-8%.
Meanwhile, BSE Midcap index plunged by 0.62% whereas BSE Smallcap index closed down 0.84%.
The market breadth in BSE ended unhealthy with 1,754 shares declining and 1,113 shares advancing.