The Sensex, which had gained about 215 points in last two days, opened weak and touched a low of 18,611.76 on selling in Reliance Industries (RIL), HDFC, HDFC Bank and L&T.
Interest-rate sensitive stocks from auto, banking and realty also suffered on fresh concerns over RBI's ability to cut rates in view of rising inflation data, said experts.
FII outflows and dollar demand pushed the rupee 1 per cent to 53.90 against the US currency, further dampening sentiment.
FMCG major ITC after hitting a new high, closed 2.09 per cent up on better-than-expected results and helped the Sensex trim some losses to end at 18,682.31 -- down 109.62 points, or 0.58 per cent over Thursday.
"The Sensex slipped 0.6 per cent due to profit booking in banking & financials, infrastructure, metals, auto and oil & gas exploration," said Sanjeev Zarbade, Vice President (PCG Research), Kotak Securities.
Among 30-share Sensex, Hindalco, Jindal Steel, GAIL and BHEL lead the 24 losers. TCS shares weakened 1.14 per cent ahead of its September quarter results today evening.
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On similar lines, the broad-based 50-share National Stock Exchange index Nifty lost 34.45 points, or 0.60 per cent, to close at 5,684.25.
Overall, the market breadth turned negative as 1,586 stocks closed with losses while 1,275 scrips ended with gains.
"Stocks continued to face selling pressure throughout the trading day and pared most of yesterday