The biggest one-day fall on the sharemarket in 15 months has capped off a volatile six weeks for Australian shareholders.
The 108.4 point, or 2.1 per cent, fall to 5188.3 points wiped off about $34 billion in value.
It followed a 1.1 per cent rise on Thursday, the largest daily rise in almost two months.
The market capitalisation of the ASX200 index of the biggest companies has lost more than $130 billion as it plunged more than eight per cent since hitting a year high 5,658.5 points in early September.
Volatility indexes in Australia and globally have jumped to almost their highest levels for the year.
Those indexes measure fear or uncertainty and rise as stocks start to move more wildly and investors start insuring again risk through share options.
The anxiety levels of many Australian investors would be high, since a key driver of the rally in shares over the last two years has been strategies that avoid risk and volatility, CMC Markets chief market strategist Michael McCarthy said.
The best performers have included stocks such as the big banks and Telstra, targeted for reliable dividend income streams rather than capital gains.
"That tells us something about the sorts of investors in the market: they like income, they are tending towards a longer term view and are focused on dividend yields," Mr McCarthy told AAP.
Now those investors are being uncomfortably forced to actively manage their shares, rather than "setting and forgetting", IG chief market strategist Chris Weston said.
The volatility is being viewed as a market correction on global equity markets and a worrying sign about the state of the global economy, with oil price falling and even euro zone powerhouse Germany slowing.
While Thursday's rise was due to the US Federal Reserve hinting it would not raise interest rates soon, a day later people were wondering whether that was a good thing and Wall Street suffered its biggest loss for the year.
After years of easy money through record low interest rates and economic stimulus, the US economy still could not stand on its own two feet, said Mr Weston.
"Ultimately no-one wants to buy when you've got a limited amount of foresight and stocks naturally fall under their weight," he said.
Mr McCarthy said while it was painful for investors watching their investment values slide, he thought the current downward run was close to ending.
As long as investors did not panic, he thought they would buy in when the index fell enough for dividend yields - dividend relative to share price - for the ASX200 to rise above six per cent.
"For a lot of our customers this is great news, while volatility can scare investors it is a trader's best friend," he said.
MARKET PLUNGES
*The 2.1 per cent drop was biggest one day fall since June 20, 2013.
*About $34 billion was wiped off the market.
*Nearly $134 billion lost and 8.3 per cent fall since September 2.
Share
