After gaining 1,758 points in past five sessions, the Sensex fell by 215.57 points, or 1.08 percent to 19,781.88.
Industrial production, which contracted by 2.82 percent May and 2.2 percent in June, is likely to contract in July as well, brokers said, adding that retail inflation may have marginally slowed to about 9.5-9.6 percent in August.
Retail inflation stood at 9.64 percent in July. The broad-based National Stock Exchange index Nifty fell by 62.45 points, or 1.06 percent to 5,850.70. Also, SX40 index, the flagship index of MCX-SX, ended at 11,734.34, down 104.25 points or 0.88 percent.
Selling was more confined to recent gainers like banking, metal and consumer durables sectors, dealers said.
On the currency front, the rupee -- which spurted by 425 paise or 6.238 percent in five straight days -- fell to 63.96 and was last trading at 63.8 levels against the dollar.
Traders said markets are expected to be volatile until the Federal Open Market Committee meets next week to discuss whether it should scale down its bond buying programme.
In 30-share Sensex, 23 stocks declined led by ICICI Bank, Hero MotoCorp, Bajaj Auto, Bharti Airtel, BHEL, Coal India, HUL, Infosys, SBI, Maruti Suzuki and RIL.
Sectorally, the metal sector index suffered the most by losing 2.53 percent to end at 8,414.31, followed by banking index (down 1.86 percent), consumer durable index (1.84 percent) and auto index(1.80 percent).
Meanwhile, Moody's on Thursday said weak rupee and higher borrowing costs will impact credit quality of several Indian companies.


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