The BSE Sensex fell 0.6 percent on Friday, posting its biggest weekly fall in nearly three and a half months, as fresh concerns about the European debt crisis compounded lingering worries over weak domestic growth and slow government decision making.

Cigarette and consumer goods major ITC, and frontline banking and auto stocks contributed most to the losses as investors expect growth to slow in coming quarters given rising cost pressures, high interest rates and a slump in the Rupee.

The benchmark index fell 4.8 per cent for the week, its worst performance since the week ended August 7. This was its third straight weekly decline.

"The sentiment is absolutely pathetic, we are not seeing any sort of buying support," said Ambareesh Baliga, chief operating officer at Way2Wealth Securities.

"This can only come to a stop if large investors start buying, and one trigger for that could be some major, market-friendly announcements from the government," he said.

The main 30-share BSE index fell 90.20 points, or 0.55 per cent, to 16,371.51 points, its lowest close in six weeks. Eighteen of its components ended in the red.

The benchmark is down 20.2 per cent in 2011 and is among the worst performing markets in the world. Foreign portfolio investors have bought equities worth $571 million so far this year, sharply down from $29 billion they invested in 2010.

Analysts said several large-and mid-cap stocks were seeing selling on account of worries about high debt levels, a fall in the rupee impacting foreign loans and promoters facing pressure on shares pledged with lenders.

More than $33 billion worth of shares have been pledged with banks as collateral, with founders of as many as 17 companies pledging over 90 per cent of their holdings, Bank of America-Merrill Lynch had said in a June report.

"There is uncertainty about earnings going forward, input costs staying elevated and fiscal deficit," said K.K. Mital, chief executive for portfolio management services at Globe Capital.

Concerns were heightened after the Indian rupee skidded beyond 51 against the dollar earlier on Friday, to its lowest in 32 months, weighed down by rising oil import payments, and slowing exports and foreign inflows.

Cigarette and consumer goods maker ITC, which has seen strong gains in the past two months, lost 2.9 per cent at 201.80 rupees - falling for the second straight day.

Banking shares continued their downward trend on worries that rising slippages and provisioning due to high interest rates would impact earnings in coming quarters.

Largest lender State Bank of India and ICICI Bank both fell to multi-year lows in intra-day trade before recovering to close down 1.8 per cent and 1.1 per cent respectively. The sector index was down 0.9 per cent.

Auto stocks, which have also been under pressure amid worries over sharply lower demand, also took a beating. Maruti Suzuki fell 0.8 per cent, after earlier touching its lowest level in two and a half years.

Tata Motors and Mahindra & Mahindra fell 2.7 per cent each.

Shares of software services exporters such as Tata Consultancy Services and Infosys, which get more than half their revenue from the United States, did not benefit from the weakness in the rupee, with TCS falling 2.6 per cent while Infosys lost 0.5 per cent.

Smaller rival Wipro, which traded in the negative zone for most of the session, ended 1.7 per cent higher.

Among stocks that bucked the downward trend, largest two-wheeler Hero Motocorp jumped 3.5 per cent, while drugmakers Sun Pharmaceutical and Cipla rose 1.3 per cent and 1.1 per cent, respectively.

Shares in retailers rose after media reports that the government may allow foreign direct investment in multi-brand retail. Foreign partnership hopefuls Pantaloon Retail and Shoppers Stop rose 9 per cent and 0.3 per cent respectively.

The 50-share NSE index closed down 0.6 per cent at 4,905.80 points.

In the broader market, losers outnumbered gainers in the ratio of 2.4:1 on heavy volume of 708 million shares.