Sensex lost 184 points to trade at 23,878 and the Nifty has dropped 55 points to quote at 7,254.
BSE is among the world's ten largest exchanges in terms of market value, while it is the largest globally for number of firms listed on its platform.
Dealers attributed the fall in rupee to gains made by US dollar against the euro and other overseas currencies ahead of US jobs data and a lower opening in the domestic equity market.
'We believe 2017 could see higher flows from foreign institutions as money comes back to growth markets like India.'
The rupee resumed higher at 61.13 per dollar as against yesterday's closing level of 61.40 at the Interbank Foreign Exchange and strengthened further to 60.90 per dollar before ending at 61.05 per dollar, a gain of 35 paise or 0.57 per cent.
Sensex closed over 118 points down on Thursday.
After a volatile session, Sensex closed the day 563 points lower
During the dot-com bubble, it had touched a high of 1.9.
ICICI Bank was the top gainer in the Sensex pack, surging 4.64 per cent, followed by Axis Bank at 3.86 per cent and SBI 2.53 per cent.
The rupee had recovered by 8 paise to close at 66.91 in Tuesday's trade.
The derivatives expiry on Thursday is also expected to add to the volatility.
At the Interbank Foreign Exchange Market, the rupee resumed lower at 59.72 a dollar from the previous close of 59.67 and declined to a low of 59.88. It bounced back on dollar selling by exporters and some banks, touching a high of 59.30 before settling at 59.35, a rise of 0.54 per cent.
The 30-share Sensex stayed in the green for the better part of the session and hit the day's high of 38,297.70 as buying pace gathered momentum towards the fag-end.
The 50-share NSE Nifty settled lower by 76.05 points, or 0.88 per cent, at 8,615.25
Increased demand from oil importers for the American currency and a weak opening in the domestic stock market also put pressure on the rupee.
Even US equities are now back to end-2014 levels.
Profit taking in index heavweights RIL and HDFC weighed on sentiment while ICICI Bank surged 7%.
n the broader market, both the BSE Midcap and Smallcap indices, were up 1.2% and 0.7% each.
The former finance minister also criticised Prime Minister Narendra Modi over the words he chose to attack his predecessor Manmohan Singh, saying he should remember that the Chair he sat on was used by Pandit Jawaharlal Nehru and even Atal Bihari Vajpayee and hence he should use right language.
The broader markets ended mixed with mid-caps gaining 0.1 per cent and small-caps falling 0.1 per cent on the BSE.
But much depends on govt action & global economy; Sensex gains in 2070 the biggest in five years
At the Interbank Foreign Exchange market, the domestic currency resumed stable at its overnight close of 60.07 a dollar and immediately touched a low of 60.09.
The market is clinging to support above the 8,000 mark and hitting resistance above 8,150.
The Bank Nifty is high beta anyhow and it could move the broader market.
Investors booked profits after strong 641-point rally in the previous two sessions, brokers said.
The rupee may also gain against the euro but be prepared for a snapback in the euro as Greece resolves.
The markets will remain choppy ahead of RBI policy.
Broader market outperformed the frontline indices with the Smallcap and Midcap gaining up to 1%
Forex dealers said dollar's weakness against other currencies overseas supported the rupee.
Market participants are now awaiting Thursday's meeting of the European Central Bank
Sensex ended strong, Tata Steel, HUL climb higher.
Between Friday's and Monday's close: Yields on 10-year bonds up 6 basis points, rupee slides 13 paise against dollar, Sensex ends flat
The rupee on Thursday appreciated 20 paise to end at 62.37, its highest in two weeks, on positive trends in local equities and fresh dollar selling by exporters.
It could be a tough week In the run-up to such an event, the market is always nervous.
May touch 64/$ due to foreign flows slowing down
'Overall, the Indian economy is doing well.' 'Our economic fundamentals are strong and the early signs of recovery are sustainable.' 'This is positive for the market in the long run.'
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Some analysts believe that markets are expected to remain unclear and would have to wait until tomorrow's US non-farm payrolls data.
And why markets could give up 25 per cent of all these gains made since March 2020
The year 2014 has been one of the best for investors in the equity markets.
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