Markets edged lower for the second consecutive day as investors averted from holding on to shares ahead of the weekend as heightened worries of a double dip recession in the west weighed.
The Sensex declined 199 points, at 16,162 and the Nifty was down 56 points, at 4,868.
Earlier in the day, the markets opened on a weak note as downbeat outlook by the US Federal Reserve prompted investors to flee from riskier assets.
The Sensex touched a low of 16,052 around noon, but buying in IT stocks and stabilization in the European bourses helped the index recover and touch a high of 16,368.
Finally, selling emerged in the last leg of the trade and Sensex slipped over 1%. Markets snapped four week of gains, slipping 5% for the week.
Rupee declined to 28 month low of Rs 49.90 per dollar as concerns in Europe and United States prompted institutional investors to liquidate their holdings in India. Indranil Pan, Chief Economist from Kotak Mahindra Bank said, Rupee could witness downside further bias and test 50.2/$ levels because of the flight to safety which has led to the dollar supply squeeze.
Going forward, markets analysts expect some bounce in an overall bearish trend.
Amit Chheda, Head of Equity from Inventure Growth and Securities said, "While a close below 4,900 is definitely bearish for Nifty, Friday's indecisive performance and any softening of dollar/rupee rates in the coming sessions could trigger fresh buying in equities."
On the downside, Nifty has support around 4,830-4,720 and resistance around 4,900 and 5,050.
In Asia, markets ended in the red, but were off day's low after Group of 20 nations in a meeting in Washington promised to support Europe's flagging financial system.
The Hong Kong's Hang Seng Index declined over 1%, the Shanghai Composite Index closed down 0.4% and South Korea's Kospi Composite closed down 6%. Markets in Japan were closed on account of Holiday. In Europe, the CAC40, DAX and FTSE 100 gave up their early gains and were trading down over 1% each.
On the Sensex, Reliance Industries, HDFC and HDFC Bank were the top losers, down between 1-3% each. Only 10 components on the Sensex ended in the green, Cipla advanced over 2%, Tata Power and State Bank of India were up, over 1% each.
BSE Metal index, down over 2% was the top loser for the second consecutive day as it faced the storm of slowing growth in the west. Hindalco was down 4%, Tata Steel and Sterlite plunged around 2% each.
BSE Capital Goods was the next worst hit, down 1.8%. ABB fell 6%, Punj Lloyd and Usha Martins slipped over 4% each.
Broader markets also ended in the red, the midcap index slipped 0.8% and the smallcap index was off 1%.
Market breadth was negative, 1806 stocks declined for 985 advancing stocks.