The BSE Sensex lost 297.50 points or 1.84 per cent to settle at 15,848.83 points, its lowest closing level since February 5, 2010. The index fell 380.80 points at the day's low of 15,765.53 in late trade and jumped 110.05 points at the day's high of 16,256.38 in morning trade.

The S&P CNX Nifty shed 91.80 points or 1.9 per cent to settle at 4,747.80, its lowest closing level since 5 February 2010. The Nifty hit a low of 4,720 in intraday trade. For one, investors turned jittery ahead of Ben Bernanke’s speech at the annual summer retreat in Wyoming, where he might lay out some plans to steer the weak economy. However, most experts view that the Federal Reserve may not be left with any rabbits in its hat after the US-government spent nearly $2.3 trillion in a massive bond buying program since 2009.

“The global developments continue to cast a shadow on the stock market. Fed meeting tonight and its outcome is likely to influence the market trend in the short term,” said Shanu Goel, Senior Research analyst at Bonanza Portfolio here. 

Apart from weak global shares, data showing sustained selling by foreign funds this month hit investor sentiment in D-Street. Fresh build-up of shorts and sell-off by foreign institutional investors weighed on the market as lots of stocks touched new 52-week low in the day's trade, which included not only midcaps and smallcaps but also largecaps.

Macroeconomic worries within the country also weighed on the market as bond prices dropped following comments from a senior government official that Union government is likely to borrow at least Rs 30,000 crore more than it has budgeted this fiscal year to meet swelling subsidies.

Volatility continued as the market trimmed gains after surging to fresh intraday high in morning trade, while panic selling triggered when the Nifty broke the 4800-mark and the Sensex fell below the psychological 16,000 mark. The market breadth was quite weak this Friday and sell-off was broad-based as all the 13 sectoral indices on BSE were in the red.

Broader indices wise, the BSE Mid-Cap index fell 2.25 per cent and the BSE Small-Cap index shed 2.65 per cent, both indices underperformed the Sensex. BSE clocked turnover of Rs 2078 crore, lower than Rs 2438.34 crore on Thursday.

The market breadth, indicating the overall health of the market, was quite weak with as many as 2,226 shares on BSE fell and 641 shares rose while a total of 111 shares remained unchanged.