The blue-chip FTSE 100 closed down 0.7 percent, or 37.35 points lower, at 5,742.07 points -- marking its worst close since ending on 5,657.86 points on Sept. 5.
The index rose 3.1 percent over the third quarter, but finished the week down 1.9 percent. It also failed to hold above the key 5,800 level, which technical traders said was an important level to breach to ensure future moves higher.
Equity markets are still up since moves by major world central banks from July onwards to inject liquidity into markets via asset-purchasing programmes often known as 'quantitative easing' (QE).
However, EGR Broking managing director Steven Mayne said some investors were growing sceptical over the ability of such central bank interventions to spur economic growth.
The more QE they do, the less effective it becomes. The rally seems to have been manipulated by the central banks. It makes more sense for the market to come back down before we can start to see some value again, said Mayne.
Mayne added he would keep a 'short' trade out against the FTSE 100 index - betting on further falls in the market - until the FTSE 100 went back down to levels of around 5,700 points.
We have people sitting on the sidelines, seeing if the FTSE can go down another one percent to get a better buying opportunity, he said.
INSURER ADMIRAL FALLS
Motor insurer Admiral fell around 3 percent while rival insurer RSA slipped 1.3 percent as an Office of Fair Trading probe into the UK private motor insurance market hit the sector.
Support services group Compass also fell around 3 percent after broker Natixis cut its rating on the stock to neutral from buy.
Gains on major mining stocks such as Randgold Resources , Rio Tinto and BHP Billiton prevented the FTSE 100 from losing further ground.
Expectations that China, the world's biggest metals consumer, may unveil new stimulus measures have boosted mining stocks.
JN Financial senior trader Rick Jones said the fact that high beta stocks such as banks and miners - which either outperform a rising market or underperform a falling market - had not been hit too hard made him feel the FTSE 100 could still rally back.
I am buying dips in mining stocks. We've seen fairly shallow declines across the higher beta areas of the market, and to us, this means there is actual conviction in the market, he said.
Others were more cautious, and expected the FTSE to stay within a tight trading range between 5,600-5,800 points while worries over the weak global economy and euro zone debt crisis, which is pushing Spain towards a bailout, remained.
Brown Shipley fund manager John Smith said the uncertain environment meant he was favouring defensive stocks, such as food or tobacco companies which are less dependent on the economic growth cycle, to financial or mining stocks.
We're still biased towards defensives. We've had QE (quantitative easing) now for three years. It's holding markets up but QE is not creating growth, he said.