Metal stocks also plunged mirroring a weak trend in global markets after a data showed slump in Chinese imports, fuelling worries about the health of Asia's largest economy.
Top four Sensex losers were commodity stocks with ONGC plunging by 3.49 per cent, followed by Hindalco 2.99 per cent, Vedanta 2.80 per cent and Tata Steel 2.37 per cent.
Overall, 15 scrips ended in red from the 30-share index.
Gaurav Jain, Director of Hem Securities also blamed mixed bag of quarterly corporate earnings, weak global cues and weakening of the domestic currency for the fall.
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The rupee again breached the 65-level today by falling over 40 paise against the dollar.
The BSE Sensex resumed lower at 26,874.29 and fell further to 26,719.10 on heavy selling. However, it recovered later to 26,918.52 on fresh buying before ending at 26,846.53, still showing a loss of 57.58 points or 0.21 per cent.
Market showed some signs of firmness in early trade on the back of positive macroeconomic data with industrial production growing at a nearly three-year high of 6.4 per cent in August.
However, retail inflation rising to 4.41 per cent in September, had a negative impact and triggered selling.
A cautious stance from the participants trimming positions ahead of the TCS earnings too spoiled the market mood.
Stocks of TCS, country's largest software company, managed to close in the green at Rs 2,597.40 with mild gains.
Meanwhile, Asian and European markets dropped after a Chinese data signalled weakening global and domestic demand, the latest evidence that the world's number two economy is stalling.