Shares fall after a report by the Prime Minister's economic panel suggested it would be a challenge for the government to meet its fiscal deficit target of 4.8 per cent of the GDP in the current year.
The BSE Sensex is down 0.3 per cent while Nifty falls 0.13 per cent.
Blue chip shares such as ITC Ltd fall as traders lighten positions ahead of whole price inflation data on Monday and the U.S. Federal Reserve's decision on stimulus tapering, as well as RBI policy review later in the next week.
However, foreign institutional investors provisionally bought 9.30 billion rupees worth of shares on Thursday, bringing their total to nearly 66.7 billion rupees over the previous six sessions, exchange data shows.
Earlier, better-than-expected July 2013 industrial production data and fall in retail inflation led the benchmark S&P BSE Sensex to recover by 32 points to quote at 19,813.95 points in late morning deals on Friday, despite weak trends in other Asian markets.
The 30-share index resumed lower following weak Asian cues but rebounded while quoting at 19,813.95 points (1015 hrs). It showed a rise of 32.07 points or 0.16 per cent.
On Thursday, it had plunged 215.57 points or 1.08 per cent. The 50-share CNX Nifty also rose 8.05 points, or 0.14 per cent, to trade at 5,858.75 (1015 hrs).
After contracting for two straight months, the factory output measured in terms of the Index of Industrial Production (IIP) entered the positive zone in July, recording a growth of 2.6 per cent on account of improved performance of manufacturing and power sectors.
Meanwhile, IIP for June was revised upwards to a decline of 1.78 per cent from a provisional 2.2 per cent dip in production.
Retail inflation measured on the Consumer Price Index (CPI) eased to 9.52 per cent in August from 9.64 per cent in July following softening in prices of almost all commodities, except vegetables.
Capital goods, pharma, power and PSU shares were the gainers while IT and banking shares suffered losses.
Asian shares showed weak trend due to overnight fall on Wall Street, as investors fretted stronger-than-expected US jobless-claim data on Thursday which increased the odds that the Federal Reserve would begin trimming its monetary stimulus at next week's meeting.
Meanwhile, foreign institutional investors (FIIs) bought shares worth Rs 930.54 crore