Indian shares were largely flat with a weaker rupee giving boost to export-oriented sectors such as pharma and IT, while overall sentiment was dented after U.S. Federal Reserve Chair Janet Yellen signalled an interest rate hike was imminent.
The rupee fell as low as 68.15 per dollar, its weakest since June 24, compared with the previous close of 67.82.
The fall came with the dollar vaulting to a 13-1/2-year high against a basket of major currencies as U.S. bond yields rose after Yellen said the central bank could raise interest rates "relatively soon."
Sentiment at home was also hit by the government's move last week to remove high-value notes, disrupting daily lives of millions of Indians who live in a cash economy that is estimated to account for a fifth of the country's $2 trillion gross domestic product.
"There is a major liquidity issue in the domestic market due to the banknotes action and the volatility in the rupee because of rising U.S. bond yields will likely continue for some time," said Vinod Nair, head of research at Geojit BNP Paribas Financial Securities.
"The 8,000 level for Nifty is very important, but the risk of it falling below that mark will be there as the market will continue to remain cautious for a while amid domestic and global uncertainties."
The Nifty was up 0.04 percent at 8,082.7 as of 0615 GMT, while the Sensex was 0.03 percent lower at 26,222.18.
Both indexes looked set to post their fourth straight weekly loss.
The Nifty IT index was in positive territory after three straight sessions of falls with HCL Technologies up 1.8 percent.
A local IT sector lobby group cut its growth forecast for 2016-2017, citing local and global factors.
All the stocks of the Nifty pharma index rose with Sun Pharmaceutical Industries 2.6 percent higher and Aurobindo Pharma up 2.3 percent.
Meanwhile, the NSE Bank index was 0.32 percent lower with ICICI Bank declining as much as 1.1 percent and State Bank of India shedding up to 0.67 percent.
(Reporting by Samantha Kareen Nair in Bengaluru; Editing by Subhranshu Sahu)