Inflation based on the wholesale price index touched a 3-year high at 7% for the week ended March 22 as against 6.68% in the week before.
The Sensex finally ended with a significant loss of 489 points at 15,343.
The market breadth was fairly negative - out of 2,697 stocks traded, 1,823 declined, 808 advanced on Friday.
The NSE Nifty dropped 125 points to close at 4,647.
Index shakers
BHEL and HDFC tumbled nearly 7% each to Rs 1,634 and Rs 2,278, respectively. Mahindra & Mahindra slumped 6% to Rs 605.
Larsen & Toubro slumped 5.7% to Rs 2,686. Jaiprakash Associates plunged over 5% to Rs 221.
Bharti Airtel and Wipro dropped 4.5% each to Rs 784 and Rs 416, respectively. ITC shed 3.5% at Rs 201.
ICICI Bank, Maruti and Reliance slipped 3% each to Rs 764, Rs 764 and Rs 2,322, respectively.
Cipla dropped 2.7% to Rs 214. HDFC Bank, DLF, Reliance Communications and Infosys declined around 2.5% each to Rs 1,292, Rs 608, Rs 500 and Rs 1,483, respectively.
Tata Motors and NTPC were down 2.3% each at Rs 614 and Rs 190, respectively.
Ambuja Cements, Reliance Energy, SBI and TCS were the other major losers on Friday.
And the movers
Ranbaxy surged 2.5% to Rs 458. Tata Steel ended a Re higher at 661.
Value and volume toppers
Reiance Petroleum topped the value chart with a turnover of Rs 247.60 crore followed by Reliance Capital (Rs 240.50 crore), BHEL (Rs 216.30 crore), Reliance (Rs 206.70 crore) and Larsen & Toubro (Rs 199.50 crore).
Ispat Industries led the volume chart with trades of around 2.15 crore shares followed by Tulsi Extrusions (1.54 crore), Reliance Natural Resources (1.48 crore), Reliance Petroleum (1.46 crore) and Indiabulls Securities (96 lakh).