The market also tracked weak global shares after a Republican proposal to deal with a U.S. fiscal crunch failed to get enough support, deepening uncertainty over the U.S. can avert the "fiscal cliff" of automatic spending cuts and tax increases set to start January 1.
Indian shares are expected to remain volatile next week amid uncertainty around the U.S. "fiscal cliff" and as markets head into the last derivatives expiry of 2012 on Thursday.
"Markets are hoping for a solution to the U.S. fiscal cliff issue because if a solution is not reached, it can impact sentiment negatively," said Dipen Shah, Head of Private Client Group Research, Kotak Securities.
"We expect the issue to be resolved and the same can provide relief in short term," he added.
The Sensex fell 1.09 percent, or 211.92 points, to end at 19,242, marking its biggest single-day percentage fall since October 30, and ending 0.39 percent lower for the week.
The Nifty shed 1.16 percent, or 68.70 points, to end at 5,847.70, closing below the psychologically key 5,900 level, also ending down 0.54 percent for the week.
Bharti Airtel shares ended 3 percent lower after the CBI filed charges against the company and Vodafone Group Plc's India unit on Friday as part of a probe into alleged corruption in the allocation of mobile phone airwaves a decade ago.
Banking shares such as State Bank of India fell 2 percent on profit-taking, after gaining 9.7 percent in Decmeber, as of Thursday's close.
Mahindra & Mahindra shares ended 1.6 percent lower on earnings concerns, after the automaker said it would buy Navistar International's 49 percent stake in its two joint ventures, in a $33 million deal.
Mahindra automotive president Pawan Goenka told analysts on Thursday that M&M's board has given executives three years to bring the two companies to profitability.
Blue Star shares fell 2.5 percent, while Voltas shares lost 3.9 percent after Nomura said it has come away "with extremely negative takeaways" for the Indian heating, ventilation and air conditioning (HVAC) market after meeting a Blue Star executive in charge of the segment.
However, among gainers, Mahindra and Mahindra Financial Services Ltd ended 1.3 percent higher after the board approved a stock-split in the ratio of five new shares for ever one held.
Shares is Adani Enterprises Ltd ended 0.7 percent higher after earlier gaining as much as 5 percent in early trade after its promoters set the floor price for a share sale at 282 rupees per share.
(Copyright Thomson Reuters 2012)