The NSE Nifty gave in too, slipping below the 7,800-mark.
RBI Governor Raghuram Rajan is under pressure to cut the repo rate to a four-year low tomorrow to 7 per cent and expectations for the same have skyrocketed, especially after the US Fed's status quo and a record low inflation here.
Rajan has already eased the policy rate by 75 bps this year so far.
Even IIP for July put up a dismal show and exports continue to remain in choppy waters.
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The BSE Sensex opened higher, advanced to a high of 25,936.89 following the beginning of October series, but succumbed to profit-booking before ending at 25,616.84, loss of 246.66 points, or 0.95 per cent.
This is index's weakest closing level since 25,610.21 on September 11.
The 50-share NSE Nifty slumped below the psychological 7,800-mark and settled down 72.80 points, or 0.93 per cent, at 7,795.70.
The China factor also added to the anxiety level as profits in major industrial companies saw their sharpest decline in four years last month.
"We are in a wait-and-watch scenario ahead of the RBI policy meet tomorrow. We believe that the market has already considered a rate cut of 25 bps, hence the commentary will be more important," said Vinod Nair, Head-Fundamental Research, Geojit BNP Paribas Financial Services.
Meanwhile, data showed foreign investors net sold shares worth Rs 115.10 crore on Thursday. Markets remained closed on Friday for Eid.