In the broader market, BSE’s smallcap gauge fell 2.10 per cent and midcap 2.06 per cent.
Dalal Street on Friday fell under heavy selling pressure, reflecting a slowdown in global equities as investors braced for slowing global growth amid policy tightening by central banks.
A sharp depreciation in the rupee amid rising crude oil prices and unabated foreign fund outflows added to the crisis.
The 30-share BSE Sensex closed at 54,835.58, down 866.65 points or 1.56 per cent. During the day, it closed at 54,586.75, down 1,115.48 points or 2 per cent.
Similarly, the broader NSE Nifty closed at 16,411.25, down 271.40 points or 1.63 per cent.
Bajaj Finance was the top gainer in the Sensex pack, falling 4.91 per cent, followed by Axis Bank, Bajaj Finserv, Nestle, Wipro, HDFC, Infosys, HDFC Bank and UltraTech Cement.
In contrast, Tech Mahindra, PowerGrid, ITC, SBI, NTPC and Sun Pharma gained up to 2.21 per cent.
On a weekly basis, the Sensex fell 2,225.29 points or 3.89 per cent, while the Nifty lost 691.30 points or 4.04 per cent.
“The market was in a south direction since the beginning of the trading session and thereafter selling picked up as rising crude oil prices raised apprehensions that inflation would be a major challenge ahead.
Amol Athawale, deputy vice-president, technical research, Kotak Securities Ltd., said, “The market is in a dilemma that in a rising interest rate scenario, a more rigid stance by the RBI going ahead could hurt growth.”
In the broader market, BSE’s smallcap gauge fell 2.10 per cent and midcap 2.06 per cent.
Most of the BSE sectoral indices ended lower with losses of 3.53 per cent, metals (3.10 per cent), basic materials (2.80 per cent), consumer durables (2.41 per cent) and IT (2.27 per cent). Utilities and power settled with benefits.
2,519 shares declined, while 835 advanced and 106 remained unchanged.
World markets, which initially slashed US Fed rate hikes, slipped on interest rate hikes in China and renewed concerns about an economic recovery amid lockdowns.
Meanwhile, the Bank of England on Thursday raised its key interest rate to a 13-year high.
Elsewhere in Asia, markets in Hong Kong, Shanghai and Korea ended lower, while Tokyo ended higher. Exchanges in Europe were trading in negative territory in the afternoon session. Wall Street had fallen in overnight trading on Thursday.
“A sharp crash in US stocks as the market assessed the need for higher rate hikes to offset higher inflation levels, leading to a massive sell-off in global markets.
Vinod Nair, head of research, Geojit Financial Services, said: “The Bank of England, while increasing its interest rates, warned about the potential risk of recession, raising investor fears.” International oil benchmark Brent crude jumped 2.20 per cent to $113.3 per barrel.
The rupee on Friday closed 57 paise lower at 76.92 (provisional) against the US dollar, weighing on a firming US currency overseas and firming crude oil prices.
Foreign institutional investors were selling shares worth a net Rs 2,074.74 crore on Thursday, according to stock exchange data.