After gyrating over 945 points during the day, the 30-share index settled 214.22 points or 0.55 per cent lower at 38,409.48.
The broader NSE Nifty closed 52.30 points or 0.46 per cent down at 11,251.
Top laggards in the Sensex pack included IndusInd Bank, Bajaj Finance, ITC, UltraTech Cement and HDFC Bank, while Sun Pharma, Tech Mahindra, M&M and Asian Paints ended with gains.
Traders said the domestic market turned increasingly jittery as 28 coronavirus cases were confirmed in India. At the beginning of the session, only six cases were reported.
Global stocks, on the other hand, rallied after the US central bank cut its benchmark interest rate by a sizable half-percentage point in an effort to support the economy in the face of the spreading coronavirus.
Fed Chairman Jerome Powell noted that the coronavirus "poses evolving risks to economic activity".
The rate cut, however, failed to cheer Indian investors. There are still a lot of uncertainty on how the major economies will contain the spread of the virus, according to Ashika Institutional Equity Research.
"Thus, we remain skeptical that Fed rate cut will stabilise markets sentiments due to coronavirus outbreak," it said.
Bourses in Shanghai, Seoul and Tokyo ended on a positive note, while Hong Kong settled with losses.
Stock exchanges in Europe opened up to 1 per cent higher.
Brent crude oil futures rose 0.58 per cent to USD 52.16 per barrel.
On the currency front, the Indian rupee depreciated 14 paise to 73.34 per US dollar (intra-day). ANS ABMABM