Cutting short two days of consecutive gains, the Bombay Stock Exchange's 30-share barometer ended the session at 18,208.78, down by 29.53 points, or 0.16 per cent.

Firm cues from Asian and European markets also failed to boost the Sensex, owing to uneasiness over high valuations.

The main index fluctuated between a high of 18,316.32 and a low of 18,206.50.

On a weekly basis, the Sensex recorded a gain of 1.23 per cent.

In a choppy session, the wide-based 50-share Nifty Index of the National Stock Exchange finished the session at 5,479.40, down 0.12 per cent.

"The Nifty struggled to sustain above the 5,500 levels as food and fuel inflation inched higher," IIFL Vice-President (Research) Amar Ambani said.

Reliance Industries, which holds the maximum weight in the Sensex, dropped 1.23 per cent to close at Rs 925.60.

Heavy profit-booking was witnessed on metal counters, with Jindal Steel losing 2.10 per cent -- the most in the Sensex scrips. Sterlite Industries declined 1.2 per cent and Hindalco 1.47 per cent.

ICICI Bank slipped 0.32 per cent, HDFC 0.23 per cent, ITC 0.52 per cent and L&T by 0.36 per cent.

Brokers said that fund houses were cautious ahead of the critical US monthly payrolls figures and after the rise in food inflation.

The elevated inflation means real interest rates remain decidedly negative, discouraging saving and disrupting investment decisions.

After declining for two consecutive weeks, food inflation inched up marginally to 10.86 per cent for the seven days ended August 31 from 10.05 per cent during the earlier week, raising concerns that the Reserve Bank may further hike its policy rates.

The RBI may hike the repo rate by 25 basis points during its meeting on September 16, Moody's Analytics said in a note.

Jaiprakash Associates dropped 1.5 per cent, TCS 0.74 per cent and Tata Power 0.73 per cent.

However, a rise in auto, realty and IT stocks cushioned the losses suffered by metal, oil & gas and consumer goods.

Snapping its three-day losing streak, Hero Honda bounced back and was the top performer in Sensex pack. The two-wheeler major ended with a gain of 2.14 per cent.

Anil Ambani-led R-Infra rose 1.6 per cent, Bharti Airtel by 1.6 per cent and ONGC by 1.17 per cent.

IT bellwether Infosys advanced 0.76 per cent, DLF 0.7 per cent, M&M 0.5 per cent and Cipla 0.66 per cent.