The stock market continued its downward journey on Friday, after a brief recovery Thursday, wiping off 746.4 points (5.48 per cent) on the bellwether BSE Sensex during the week, the biggest weekly loss in seven months, on global cues, worries over a slowdown in the US economy and concerns of excess valuation in domestic stocks.

The Sensex closed at 12,886.13 points, down 273.42 (2.08 per cent) from Thursday. The Sensex is now 1,396.59 points (9.77 per cent) from its peak of 14,282.72 points on January 25 this year. The broader Nifty-50 Index fell 84.45 points (2.22 per cent) to 3,726.75.

Analysts said the US government's action against brokerage houses Morgan Stanley, UBS AG and Bear Stearns executives for insider trading may also have contributed to some selling pressure in the Indian markets.

Foreign funds have been big sellers for the last couple of days, offloading stocks worth about Rs 4,000 crore (Rs 40 billion) in the last five trading sessions.

"The markets were anyway due for a correction. A combination of factors such as the global meltdown and heavy outstanding derivatives positions acted as a trigger for the current fall," said Ajit Roongta of IDBI Capital Markets.

Larsen & Toubro fell about 5 per cent to Rs 1,464.60, becoming the biggest loser among Sensex scrips, followed by State Bank of India (down 4.19 per cent to Rs 1,008.45), TCS (down 3.76 per cent to Rs 1,208.45), Reliance Industries (down 3.61 per cent to Rs 1,317.35) and ITC (down 3.45 per cent to Rs 166.65).

Among sectoral indices, the BSE Capital Goods Index was the biggest loser (down 3.05 per cent), followed by BSE IT Index (down 2.31 per cent), BSE Teck Index (down 2.36 per cent) and BSE Oil & Gas Index (down 2.30 per cent).

Technical analysts see the market coming down further to find some amount of support. "The Sensex may find support at 11,800 level and for Nifty, the level will be 3,334," said an analyst.

The market breadth was also tilted heavily towards the declining stocks. Over 1,600 stocks ended in the negative territory, while 998 stocks ended positive from yesterday.