A sluggish European stocks opening and capital outflow concerns also affected market sentiment.
Losses in RIL, ONGC and Gail India weighed on benchmark indices. US oil price fell below the key USD 60/barrel mark for the first time since July 2009. A sustained drop in oil, which will hit margins of oil related firms, is being seen as a sign of weakness in global economy, traders said.
Besides refinery, realty, consumer durable, capital goods, metal and power shares too were at the receiving end.
Selling was mainly seen across-the-board as 11 out of 12 sectoral indices finished in the red while only healthcare index ended in the green on defensive buying.
The BSE 30-share barometer resumed stable and improved to a high of 27,692.32 on firm Asian cues on the back of rally on Wall Street yesterday. Later, it met with strong resistance and fell back to settle at 27,350.68 on bearish European opening, a fall of 251.33 points or 0.91 percent.
"There was weakness across sectors, which was brought about by the global concerns. Markets are concerned about a global slowdown, as reflected in demand from major oil producing organisations. Markets were also cautious ahead of the inflation and IIP data scheduled post-market," said Dipen Shah, Head- PCG Research, Kotak Securities.
On a weekly basis, Sensex has plunged by 1,107.42 points or 3.89 per cent the worst weekly drop since December 2011.
The 50-issue CNX Nifty of the NSE also plummeted by 68.80 points, or 0.83 per cent, to end at 8,224.10 on Friday.
Sustained selling by foreign funds ahead of Christmas holidays also aided the down trend. FPIs sold shares worth Rs 808.27 crore yesterday, as per provisional data.