The benchmark S&P BSE Sensex is still up 436 points in October despite posting losses for five consecutive sessions in the last week of the month.
A 50-bps cut in repo rate announced by the Reserve Bank of India (RBI) on 29 September had lent support to the market in early October, with the Sensex seeing a sharply rally from 26,220 points to break above 27,000 levels.
A larger-than-expected RBI rate cut led to a rally in banking, reality and auto shares, while metal, IT shares remained under pressure.
The rally was also supported by positive global cues after weak US economic data eased concerns over interest rate by the country's central bank. A rebound in crude oil prices had also underpinned the markets.
However, markets lost some steam in the second week of October after India's second-largest IT firm Infosys cut its revenue guidance for the current fiscal despite posting better-than-expected profit for the September quarter.
Infosys revised down its guidance to 6.4-8.4 percent in dollar terms from a previous estimate of 7-9 percent, while announcing a 9.8 percent increase in profit to Rs 3,400 crore in the July-September period.
Despite mixed earnings results by India Inc, the benchmark indices gained strength in the third week of October, with the Sensex touching a monthly high of 27,470 points tracking a rally in global markets, after a cut in key policy rates by the Chinese central bank eased fears over slowdown in the world's second-largest economy.
But the gains proved to be short-lived as the market became nervous going into a two-day meeting of the US Federal Reserve on 27-28 October. The Fed had kept rates unchanged, but said it remained on track to start monetary tightening by the end of 2015.
The hawkish tone of the US central bank along with doubts over the victory of the National Democratic Alliance (NDA) in the Bihar polls resulted in markets ending in red in all the sessions in the last week of October.
"Worries that the NDA may not do well in the Bihar elections also weighed on sentiments. After enjoying a fantastic upswing for almost a month, the Indian equity market has taken a breather as opinions seem to be changing in the market with the Fed making direct references to a rate hike possibility in December," said Amar Ambani, Head of Research, IIFL.