The Sensex ended down 92.79 points at 4,648.41. The index opened at 4,744.48 while the high and low for the day were 4,755.94 and 4,634.90, respectively.
The index has lost six per cent so far this week. But it is still up by around 60 per cent from the six-month low it hit in late April this year. The Nifty index also shed 23.65 points to end at 1,470.45.
Dealers said that huge outstanding positions in the derivatives segment were making the traders nervous and they were unwinding prior to the expiry of the derivatives contract next week.
Monthly derivatives contracts expire on October 30 but traders have resorted to early rollover and unwinding due to a huge build-up in futures positions.
The volume of shares traded has declined to 127 million shares, the lowest so far this month, while the market breadth was negative with losers outpacing gainers by 850 to 659.
Dealers said that some of the selling is due to increased margins by the National Stock Exchange in the futures and options segment. The market is expected to find a support level at 4600, the more optimistic among the dealers said.
Most of the decline in the Sensex was due to selling in blue chip stocks. Foreign institutional investors selling in Asian markets was also a trigger for the selling in Indian markets.
Most leading Asian markets ended down after Wall Street unveiled disappointing figures for the third quarter.
Infosys Technologies declined 2.2 per cent to Rs 4,409.85 while ITC went down 3.7 per cent to Rs 844.15. Reliance Industries lost 2.7 per cent to end at Rs 457.40.
Satyam Computer fell 2.7 per cent to Rs 270 despite reporting above expectations second quarter results and an upward revision of earnings forecast.
Hindalco closed down 6.48 per cent to Rs 1,019.65. Grasim ended down 4.07 per cent to Rs 698.75 due to selling at higher levels.
Ranbaxy closed down 4.14 per cent to Rs 948.10. Other pharma scrips such as Dr Reddy
