The Sensex fell 29 points or 0.15 per cent to 19,468, its lowest levels in 2013. The Nifty ended 10 points lower at 5,887, while the rupee traded lower against the dollar at 54.0950
Markets have weakened considerably after rising to a two-year high at the beginning of 2013. Sustained weakness in the economy, as reflected in the poor macro-economic data such as factory output, has weighed on sentiments.
With Q3 earnings season almost over, traders speculate over whether the budget would be populist or pragmatic, in the backdrop of increasing deficit.
Third quarter earnings seasons, which begun well with Infosys and Reliance Industries beating estimates, is ending on a weak note after Tata Motors, SBI, DLF and Dr Reddy's disappointed.
27 stocks closed lower for the Nifty led by Dr. Reddy's Laboratories, which closed 3 per cent lower. India's No.2 drugmaker by sales, reported a larger-than-expected 29.2 per cent drop in quarterly net profit as sales in its key North America market remained muted.
Bank of America Merrill Lynch downgraded its rating on Dr. Reddy's Laboratories Ltd to "neutral" from "buy". The shares were down 2 per cent at Rs 1,836. (Read full story here)
Oil and gas major Cairn India closed down 2.6 per cent after earlier falling as much as 5 per cent. Reliance Industries closed 1.2 per cent lower.
Shares in DLF closed 2 per cent lower a day after India's largest listed real estate developer reported a net profit of Rs 285 crore, which missed market expectations. (Read: DLF shares fall, but brokerages upbeat)
Tata Motors rebounded to end at the top of the Nifty, gaining 2.4 per cent. Tata Motors was the top Nifty gainer this week despite posting weak results. (Read: Why Tata Motors shares rebounded)
State Bank of India closed with 0.80 per cent gains after analysts said the worst might be behind India's biggest lender. (Read: Why SBI shares have recovered)
Wipro also recovered from the day's low to close 0.9 per cent higher. Wipro and Siemens (down 1.5 per cent) have seen selling pressure on exclusion from the Nifty benchmark.
Siemens was the top loser this week falling nearly 8 per cent followed by DLF and Maruti Suzuki. Maruti has been excluded from the MSCI World index, leading to fund outflows.
(With inputs from Reuters)