A free-fall in rupee value coupled with high crude oil prices, along with a massive outflow of foreign funds, dragged the key domestic equity indices lower for the fifth consecutive week.
Additionally, the Reserve Bank of India's new policy stance of "calibrated tightening", uncertainty in global trade and fears over fiscal slippages led to the downward trajectory.
The S&P BSE Sensex plunged by over 2,000 points in only three trading sessions, while the NSE Nifty50 has shed over 650 points.
The Indian equity market was closed on Tuesday to observe Gandhi Jayanti.
On a weekly basis, the Sensex closed at 34,376.99 points, lower by 1,850.15 points or 5.10 per cent from its previous close.
Similarly, the wider Nifty50 of the National Stock Exchange on Friday closed at 10,316.45 points, down 614 points or 5.61 per cent from the previous week's close.
The market breadth on both NSE and BSE was negative in three out of the four trading sessions of the week.
"Domestic markets extended losses week after week on account of depreciation in rupee, higher crude prices, continuous selling by foreign investors, rising US Treasury Bond yields, and of course bloodbath in the small and mid-cap stocks...," said D.K. Aggarwal, Chairman and Managing Director of SMC Investments and Advisors.
"Fall in the rupee led to a sharp rise in government bond yields, due to increasing expectations that the RBI's monetary policy committee (MPC) could go for a bigger rate increase than expected. However, the central bank kept rates on hold."
Apart from high global crude oil prices and the government's efforts to ease domestic transportation fuels costs, the RBI on Friday belied market expectations of a rate hike. However, the "neutral" stance of monetary policy was changed to "calibrated tightening" which triggered a massive sell-off in the equities market.
The RBI's move also impacted the foreign participants in the domestic equity markets and the rupee value.
In terms of investments, provisional figures from the stock exchanges showed that foreign institutional investors sold scrip worth Rs 9,522.44 crore, while the domestic institutional investors bought Rs 6,933.07 crore stocks in the past week.
Figures from the National Securities Depository (NSDL) suggested that foreign portfolio investors (FPIs) divested Rs 7,497.46 crore, or $1,025.28 million, in the equities segment during the week ended October 5.
On the currency front, the rupee closed at 73.77 on Friday, weakening by Rs 1.29 from its previous week's close of 72.48 per greenback.
The Indian rupee plunged to a record low of over 74 during the week.
According to Deepak Jasani, Head of Retail Research at HDFC Securities: "It was the worst week in two years. Mid-cap and small-cap stocks witnessed heavy selling pressure through the week (though less than the Nifty). GoI's decision to ask OMCs (oil marketing companies) to cut prices of petrol and diesel was not welcomed by the market participants."
"There were no sectoral gainers for the week. The top losers were energy, auto, FMCG, realty and pharma indices."
The only weekly Sensex gainers were Yes Bank (up 1.48 per cent at Rs 206.20); Wipro (up 1.47 per cent at Rs 325.30 per share).
The major losers were Bharti Airtel (down 16.67 per cent at Rs 296.75); ONGC (down 16.51 per cent at Rs 146.95); Reliance Industries (down 16.21 per cent at Rs 1,049.85); Mahindra and Mahindra (down 12.28 per cent at Rs 768.60); and Hero MotoCorp (down 11.35 per cent at Rs 2,740.85 per share).