The 30-share barometer, which had soared past the 17,000-level in early trade by adding 153 points, fell by 204.17 points to 16,745.12 soon after the Reserve Bank decided to keep all key interest rates unchanged at its mid-term credit policy review.
Similarly, the National Stock Exchange index Nifty fell by 61.55 points to 5,077.50.
The fall was mostly lead by interest rate sensitive stocks such as banking and realty.
Among the sectoral indices, the BSE realty index down by 2.15 per cent to 1,587.90 points, while the Banking index shed 2.76 per cent to 11,266.46.