After rising 87 points in early trade, the Sensex saw continued selling and closed by 166.58 points, or 0.84 percent, to 19,727.27 -- the lowest level since 19,270.06 on September 6, 2013.
Similarly, the broad-based NSE index Nifty fell by 49.05 points, or 0.83 percent, to end at 5,833.20.
Asked about RBI's policy stance, Rajan in Frankfurt said: "At this point we are neutral, we will see how things develop."
"Unfortunately there is still some inflation when you strip out the effects of food and energy. Therefore, it is not just food, it's other factors also which are driving inflation," the RBI Governor said.
The RBI in the last monteary policy review had unexpectedly hiked repo rate by 25 basis point to 7.50 percent to arrest rising inflation.
In 30-share Sensex, 24 stocks declined led by SBI, ICICI Bank, HDFC Bank, HDFC Ltd., Larsen and Toubro, NTPC, BHEL, Bharti Airtel, Maruti, Dr Reddy, Hindalco, Tata Motors and Tata Power.
Sectorally, the BSE Banking sector index suffered the most by losing 1.83 percent, followed by Metal index (1.61 percent), Realty index (1.48 percent) and Capital goods index (1.42 percent).
Brokers said buying activity slowed also down as investors turned cautious ahead of the current account deficit data on Monday and a weak trend in the global stock markets.
The Sensex ended the week on a negative note losing 536.44 points, or 2.65 percent -- the first drop in five weeks.


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