Mumbai: The BSE Sensex fell over 151 points to 16,785.64 on Friday as investors sold interest rate-sensitive stocks amid concerns that the Reserve Bank may further hike its lending rates to tame inflation and lingering doubts over a resolution to euro-zone debt crisis.
Besides, investors booked profits ahead of the next week's settlement of derivative contracts.
Of the 13 sectoral indices, only BSE-Consumer Durables closed in the positive terrain. Realty, capital goods and metal segments led the decline.
The BSE 30-share barometer resumed the day higher and touched 17,032.32. Erasing the gains, it closed at 16,785.64 - down 151.25 points or 0.89 per cent. On Thursday, it dropped 148.45 points or 0.87 per cent.
Similarly, the NSE wide-based Nifty dipped 41.95 points or 0.82 per cent to 5,049.95.
Engineering and construction giant L&T was the top loser, down by 3.54 per cent, in the Sensex pack. It reported 4.3 per cent rise in net profit for the quarter ended September.
"Market experienced lacklustre trading volumes ahead of the Diwali week and RBI's upcoming monetary policy. Market is expected to be volatile ahead of monetary policy review and October derivative series expiry in the coming week," said Shanu Goel, Senior Research Analyst at Bonanza Portfolio.
Globally, Asian markets closed narrowly mixed over as European leaders indicated on Thursday that a solution to euro-zone debt troubles at their weekend meeting may not offer a long term fix yet. European equities, however, were trading higher.