After gyrating 487 points during the session, the 30-share BSE Sensex settled 11.57 points, or 0.03 per cent, lower at 38,128.90.
Similarly, the NSE Nifty declined 21.30 points, or 0.19 per cent, to 11,194.15.
Axis Bank was the top laggard in the Sensex pack, shedding over 3 per cent, followed by SBI, ICICI Bank, ONGC, HDFC and Kotak Bank.
On the other hand, Reliance Industries' market valuation crossed the Rs 14 lakh crore-mark after its stock rallied over 4 per cent to scale its fresh peak.
HCL Tech, Tech Mahindra, Sun Pharma, IndusInd Bank and Infosys were among the other gainers.
According to traders, despite the rally in index-heavyweight RIL, domestic markets turned volatile amid a selloff in global equities on escalating tensions between the US and China.
Earlier in the day, China ordered the US to close its consulate in Chengdu in retaliation to Washington's decision to shut the Chinese mission in Houston, further straining the already tense bilateral ties.
Bourses in Shanghai, Hong Kong, Seoul and Tokyo plunged up to 3.86 per cent.
Stock exchanges in Europe were trading over 1 per cent lower in early deals.
Meanwhile, international oil benchmark Brent crude futures rose 1.09 per cent to USD 43.77 per barrel.
In the forex market, the rupee slipped 8 paise to close at 74.83 against the US dollar.
Traders said a record spike in coronavirus cases in the country too weighed on domestic investor sentiment.
India saw a record single-day spike of 49,310 COVID-19 cases, taking the country's tally to 12,87,945 on Friday.
Meanwhile, the number of cases around the world linked to COVID-19 has crossed 1.54 crore.