India's benchmark share market index ended little changed from its previous session's close as institutional investors adopted a cautious approach in a highly volatile market after the runaway rally in recent weeks.

The stock market barometer 30-share Bombay Stock Exchange sensitive index or Sensex closed at 8,222.59, representing a negligible gain of 0.95 points or 0.01 percent over its previous session's close.

The market index had closed with a loss of over three percent in the previous session, making it the worst fall in the last five months, on massive across-the-board selling pressure.

The stock market sentiment was also dampened by reports of income-tax raids on some Gujarat-based stockbrokers who have branch offices in Mumbai, the country's financial capital.

The stock market had touched an all-time closing high of 8,500.28 last Tuesday on across the board buying interest.

The benchmark index had been touching record levels regularly since it breached the 7,000-level in June, making it one of the best performing markets globally.

Dealers said that the stock market opened Friday with a small positive gap as bargain hunters entered into the trading ring to pick up battered heavyweight equities at sharply lower levels.

The market couldn't maintain its gaining momentum for long and the key index plummeted by over 200 points on relentless selling pressure in heavyweight new as well as old economy stocks.

Blue-chip equities managed to recoup a large part of their losses towards the end of the trading session after Finance Minister P. Chidambaram ruled out any scam in the stock market.

In an interview to a private television channel, Chidambaram said the stock market was well regulated and there was no cause for concern due to a sharp plunge on the bourse in the previous session.

The finance minister's statement comes amid reports that a bull cartel might be behind the unbridled rally of the past couple of months.

"We are likely to see this kind of volatility in the market over the next few days till the leverage position is reduced," said Rahul Rege, head of research (equities) of online brokerage firm Sharekhan.

As the share market index touched new highs almost on a regular basis in the past couple of months, more and more investors flocked to the market to make their fortune.

Investors' wealth inside the trading ring has touched a record high. The recent rally was also fuelled by large-scale investments by overseas fund operators.

Foreign funds, considered the backbone of India's liquidity-starved capital market, have collectively put in a record over $8 billion in the current year, as against $8.5 billion in the previous year.

In the old economy sector, shares of Dr. Reddy's Laboratories, a Hyderabad-based drug maker, closed with a loss of 1.8 percent at Rs.780.30 on institutional profit booking at higher levels.

Grasim Industries, on the other hand, rose 2.2 percent to Rs.1,338.70 and Gujarat Ambuja Cements also ended 2.2 percent higher at Rs.69.45 on select institutional buying interest.