However, the Bank of Japan (BoJ) kept monetary policy steady and offered a brighter view of the economy.
The rupee tumbled by 18 paise to trade at 68.05 (intra-day), which clouded sentiment.
The index, which had lost 323.12 points in the previous four sessions, dropped another 66.72 points, or 0.25 per cent, to end at 26,307.98 -- its lowest closing since December 7. It shuttled between 26,435.56 and 26,241.43 today.
BoJ kept its policy unchanged and offered an optimistic view of the economy, brokers said, adding that deadly incidents in Germany and Turkey weighed on markets.
FIIs preferred to keep their volume at a lower level in view of approaching holiday year ending as they pulled out funds from emerging markets, they added.
Banking, healthcare and metal sectors saw the maximum decline. However, buying interest was witnessed in select sectors like IT and Consumer durables.
Other losers were Bajaj Auto, Lupin, Tata steel, Hero MotoCorp, Adani Ports, Hindustan Unilever and Axis Bank while TCS, GAIL, ITC, Coal India, NTPC and Infosys rose, which minimised the loss.
Overseas, Asian stocks ended largely mixed. Hong Kong's Hang Seng fell 0.50 per cent and Shanghai Composite Index was down 0.81 per cent.
Japan Nikkei ended higher by 0.50 per cent after the Bank of Japan boosted its view of the world's number three economy as exports picked up on the yen slide, providing some relief to the government.
As many as 19 scrips out of 30-share Sensex pack ended lower.
Sectorwise, BSE Banking index was down 1.26 per cent, followed by healthcare 1.13 per cent, PSU 0.90 per cent, metal 0.87 per cent and auto 0.84 per cent.
Mid-cap and small-cap too fell by 1.40 per cent and and 0.92 per cent, respectively, on continued offloading of positions by retail investors.
Foreign portfolio investors (FPIs) sold shares worth a net Rs 535.77 crore yesterday, as per provisional data.
Disclaimer: No Business Standard Journalist was involved in creation of this content
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