The NSE Nifty 50 fell 0.35% to 16,238.20 and the S&P BSE Sensex slid 0.4% to 54,277.72. The indexes still closed 3% higher for the week.
Shares of Reliance and Future Retail Ltd dropped 2.1% and 9.9%, respectively, after India's Supreme Court validated an arbitration order stopping the conglomerate's $3.4 billion deal to buy Future Retail.
Meanwhile, India's central bank on Friday held rates at record lows as widely expected, but it raised its inflation forecast and said it would normalise liquidity conditions in a signal policymakers could be edging closer to tapering pandemic-induced stimulus.
"It is unlikely that the RBI will change its stance in the October policy, although the split voting pattern could further increase," Kotak Mahindra Bank said in a note.
"We expect the start of policy normalization in the form of hike in reverse repo rate could be around the December policy after risks of further Covid wave fade.
The benchmark 10-year bond yield rose to 6.24%, while the Indian rupee closed at 74.16 against the dollar.
Among individual stocks, Strides Pharma Science Ltd fell 6.3% after reporting net loss in the June quarter.
Shares of Vodafone Idea rose over 19% on a report lenders of the debt-laden telecom operator were in talks to swap their debt for equity .
Among other shares, Glenmark Life Sciences closed 4% higher in its debut in the Mumbai market after its initial public offering was oversubscribed 44 times.
($1 = 74.1050 Indian rupees)
(Reporting by Nallur Sethuraman in Bengaluru; Editing by Krishna Chandra Eluri)