The battering comes amid North Korea's latest threats that it could test a nuclear weapon in the Pacific.
This is also the weakest closing since September 11 when the index had come in at 31,882.16. The gauge had lost 53.72 in the previous three sessions.
The Nifty tested 10,000-mark as well during the day's trade.
Meanwhile, the rupee weakened past the 65 mark to hit near-six-month low against the USA dollar as foreign investors continued to liquidate their holdings in the local equity markets due to domestic headwinds led by slowing growth, wider second quarter current account deficit and signs of a wider fiscal deficit.
Indian shares plunged the most in ten months on Friday as concerns over the nation's fiscal deficit and escalating tensions in North Korea prompted a selloff.
"In view of the economic slowdown, the government is reported to be open to allowing the fiscal deficit to exceed this year's target as it considers a stimulus package in the range of Rs 40,000-50,000 crore by way of increased spending", Desai told IANS.
Sentiment was in tatters after heavy losses in Asia, set off by China sovereign rating downgrade on fears over its ballooning debt and a lower opening in Europe.
Provisional figures from the stock exchanges showed that FIIs continued with their selling spree and off-loaded stocks worth Rs 5,448.66 crore during the week. At 9.52 am, Sensex was down 225.96 points on 32,144.08 and Nifty was trading at 10,037.80, down 84.10 points.
Banking stocks were among the top laggards, with the S&P BSE Bankex index declining 1.9 percent.
Major Sensex losers were: Tata Steel, down 4.70 per cent at Rs 654.55; Larsen and Toubro, down 3.49 per cent at Rs 1,184.90; Reliance Industries, down 2.83 per cent at Rs 817.50; ICICI Bank, down 2.77 per cent at Rs 277.10; and Hero MotoCorp, down 2.59 per cent at Rs 3,788.15.
"The domestic currency hit 65 levels against the USA dollar for the first time in more than five months on the back of speculation about the government going in for a fiscal deficit relaxation, with talk of a Rs 40,000-Rs 50,000 crore stimulus".
On the currency front, the Indian rupee weakened by 72 paise to close the week at 64.80 to a U.S. dollar from its previous week's close at 64.08.