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.

BSE

BSE Sensex

The benchmark index fell 4.8 percent for the week, its worst performance since the week ended Aug. 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 added.

The main 30-share BSE index fell 90.20 points, or 0.55 percent, 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 percent 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 percent 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 percent 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 percent and 1.1 percent respectively. The sector index was down 0.9 percent.

Auto stocks, which have also been under pressure amid worries over sharply lower demand, also took a beating. Maruti Suzuki fell 0.8 percent, after earlier touching its lowest level in two and a half years. Tata Motors and Mahindra & Mahindra fell 2.7 percent 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 percent while Infosys lost 0.5 percent.

Smaller rival Wipro, which traded in the negative zone for most of the session, ended 1.7 percent higher. Among stocks that bucked the downward trend, largest two-wheeler Hero Motocorp jumped 3.5 percent, while drugmakers Sun Pharmaceutical and Cipla rose 1.3 percent and 1.1 percent, 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 percent and 0.3 percent respectively.

The 50-share NSE index closed down 0.6 percent 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.

STOCKS THAT MOVED

* Kingfisher Airlines fell nearly 18 percent on concerns about the cash-strapped carrier's ability to tie up funds to continue operations, but recovered partly to close down 3.8 percent at 24.05 rupees.

On Thursday, the civil aviation minister ruled out a public bailout for Kingfisher or any other airline, urging private airlines in India to put their own house in order.

* Suzlon Energy fell 7 percent to a fresh all-time low of 22.55 rupees a day after the controlling shareholders in the wind turbine maker sold a stake of about 2 percent for $20 million.

* JSW Energy fell more than 7 percent to an all-time low of 42.25 rupees after the Economic Times reported that regulatory authorities have rejected the company's plea to revise power tariffs because of difficulty in procuring fuel from Indonesia.

TOP THREE BY VOLUME

* Suzlon Energy on 58.2 million shares

* Jaiprakash Associates on 26.5 million shares

* Unitech on 26.1 million shares