Foreign institutional investors (FIIs) sold shares worth 598 million rupees ($9.5 million) on Thursday, snapping a 32-day buying streak that totalled 238.84 billion rupees, exchange and regulatory data show.
Signs that overseas funds are losing interest in Indian shares come amidst renewed fears the Federal Reserve will move to taper its monetary stimulus.
Caution is also setting in ahead of key economic indicators next week including gross domestic product data and fiscal deficit numbers.
"The only positive flow could come from some sort of change from overseas cues and that is where the big trigger lies," said Prakash Diwan, head of Institutional Clients Group at Asit C. Mehta Investment Intermediates Ltd.
The benchmark BSE index closed down 0.06 percent, or 11.66 points, at 20,217.39 points, falling 0.66 percent for the week.
The broader NSE index also closed down 0.06 percent, or 3.60 points, at 5,995.45, staying below the psychological 6,000 point mark. It fell 1 percent for the week. Profit-taking continued to weigh on recent blue-chip gainers. Tata Motors Ltd fell 2.35 percent on Friday and posted a 3.33 percent weekly fall, its biggest since the week ended on Aug. 23.
ITC ended 1.36 percent lower and was down 1.83 percent for the week.
Recently IPO-ed Search service provider Just Dial Ltd , which peaked to an all-time high of 1,438.70 rupees on Wednesday, gave up some gains falling for a second consecutive day. The stock closed down 3.81 percent, adding to its 6.96 percent fall on Thursday.
Among gainers, Cairn India Ltd closed 3.1 percent higher after the oil explorer said its board would meet on Tuesday to consider a buy back of shares.
Tea producer McLeod Russel India Ltd gained 1.56 percent as investors closed outstanding open positions in November futures contracts leading to a short-covering rally.
Shares in United Spirits Ltd, 25 percent owned by Diageo PLC, gained 4.44 percent after rating agency ICRA upgraded its rating on company's loans and other debt facilities to take into account Diageo Plc's takeover of the Indian spirits maker this year.
FACTORS TO WATCH
* Euro rises, Bunds extend falls
* Oil slips below $110 as investors eye Iran talks
* Stocks gain as Fed-fired volatility eases
* Foreign institutional investor flows
Rajesh Iyer, Head- Investments and Family Office, Kotak Wealth Management:
International markets have been flat in the last one week after moving up on Janet Yellens statement of delay in Tapering. Indian markets had also moved up sharply a week ago hence they have given a mild correction. Hard commodities could (excluding Gold) go up in the near future because of global recovery and delay in Fed Tapering. Considering more strong inflows from FCNR B bonds (>USD 22 bn) and stable trade Deficit we expect INR/USD to range between 61-65 for the rest of FY14. Equity markets will react to international new flows and results of forthcoming state elections. Earnings downgrade cycles seems to be bottoming out and sentiment is turning positive but macros are still supporting. Except for Current Account Deficit all other macro parameters are still challenging and would take time to recover. High interest rates and Fiscal Deficit would restrict any uptick in GDP growth rate. Debt market at this juncture is attractively poised for investors looking to lock in their money for long tenor. Yields are likely to react based on inflation and tapering news flow. From the recent low, Nifty has gone up 14%. Hence, buying in corrections could be ideal for HNIs who are underweight on equities.