The benchmark indices on both the BSE and the NSE lost 140 and 34 points respectively at the close of day's trading.

The Sensex opened little changed at 4261.81 points, and touched a high of 4277.36 points. Later, distress selling by operators pulled the Sensex down to a low of 4118.09 before closing at 4122.16, a loss of 140.39 points (3.29 per cent). Nifty also lost heavily, shedding 34.55 points (down 2.55 per cent) at 1320.45 points compared to Thursday's close of 1355.10 points.

Dealers said the bourses were already reeling under pressure for the past three consecutive sessions following the Nasdaq meltdown. The bleak pre-budget economic outlook dampened the sentiments further.

"There was a flurry of activity, as bears took control of the market with bulls finding it difficult to sustain the tempo as was evident from the fact that all the 30 index-based shares ended in negative territory," a broker said. In the `A' group on the BSE, 134 stocks recorded sharp losses while only eight counters closed in positive territory.

After resuming at almost the previous close, the new economy stocks continued to wilt under selling pressure following a four-day losing streak in the Nasdaq Composite Index, which fell by another 24 points on Thursday night.The Economic Survey had warned of a continued slowdown in the growth rate in the coming fiscal. It recommended drastic measures in the Budget to cut the fiscal deficit and to expedite the pace of economic reforms.

Marketmen are apprehensive that the bleak pre-Budget Economic Survey would affect inflows from the foreign institutional investors (FIIs) after the sustained strong support given to the market in the current calendar year.

A host of frontline technology stocks hit the eight per cent lower circuit filter. Some leading new economy stocks such as Pentamedia Graphics, Global Telesystems, Aptech, Silverline Technologies and Zee Telefilms hit a new 52-week lows, as the selling pressure was intense in these counters.

Nervousness gripped the bourses little after noon-time following an avalanche of sell-orders from all quarters. The exchange recorded 8.78 lakh trades in the afternoon. The local funds were conspicuously absent to give support, a dealer said.

The Sterlite stock, which was a major gainer on Thursday, also dropped sharply on Friday. The pharma stocks, however, exhibited a steady to firm trend on investment buying.