The BSE Sensex and Nifty fell on Friday to mark their biggest weekly decline in eight as profit-taking hit blue chips such as Reliance Industries for a third consecutive day, extending the weak start to 2014.
The Sensex has fallen in each of the three trading sessions of the new year, declining 1.35 percent after gaining 8.9 percent last year on the back of strong foreign buying.
Losses also tracked lower Asian shares after a sudden reversal in some very popular, and thus crowded, trades sparked a bout of global risk aversion.
Caution is also setting in ahead of the start of the corporate earnings reporting season, with Infosys (INFY.NS) results on January 10.
"Q3 earnings would be slightly better than Q2. One should just focus on good quality businesses amid this volatility like ITC, Lupin" said Vivek Mahajan, head of research at Aditya Birla Money.
The Sensex fell 0.18 percent, or 37 points, to end at 20,851.33 and a weekly fall of 1.6 percent.
The Nifty fell 0.16 percent, or 10 points, to end at 6,211.15. It also ended down 1.6 percent for the week.
Both indexes marked their biggest weekly fall since the week ended November 8.
Reliance Industries (RELI.NS) shares fell 1.2 percent, while Larsen and Toubro (LART.NS) ended 2.3 percent lower.
Among other blue chips, ICICI Bank (ICBK.NS) fell 0.8 percent, while Mahindra and Mahindra (MAHM.NS) slumped 3.8 percent.
ICICI Bank has retraced almost the entire gain of 2.9 percent made in December over the last three trading sessions.
Tata Motors (TAMO.NS) fell 2.6 percent after December sales fell by 42 percent to 37,852 vehicles.
Among stocks that gained, Multi Commodity Exchange of India (MCEI.NS) surged 17.8 percent on acquisition hopes, after the Bombay Bullion Association said on Wednesday it was considering buying a 5 percent stake in the company.
Software exporters were also in demand ahead of Infosys Oct-Dec results next week. Infosys ended 2.4 percent higher, while Tata Consultancy Services (TCS.NS) rose 2.6 percent