Profit taking: The benchmark Nifty jumped 8.5 per cent in September so some profit booking and consolidation was expected in October.
Liquidity: Indian markets received over $3.5 billion net purchases in September. However, the net FII inflow in October was less than $2 billion.
Pace of reforms slowed down: Hopes that the government has gone in an overdrive on reforms were belied. The Cabinet's decision to raise the cap in foreign direct investment (FDI) in insurance to 49 per cent (from 26 per cent) and allow FDI in the pension sector needs Parliament's approval, which is difficult in the face of widespread political opposition.
Charges of corruption: Sentiment was also dented because of the many accusations by anti-corruption activists pointing to a political corporate nexus. DLF shares fell 11 per cent this month over accusations that the real estate major had allegedly gifted Robert Vadra, the son-in-law of Congress President Sonia Gandhi, a 65-crore interest-free loan and sweetheart deals on a series of apartments in Gurgaon. IRB Infra shares shed over 20 per cent in October over allegations of association with BJP President Nitin Gadkari's firms.
Flash crash on the National Stock Exchange: A sudden crash on the NSE sent the Nifty lower by over 900 points earlier this month.
Economic data points: Negative data points indicated that the economy continues to struggle under a severe slowdown. September trade deficit rose to its widest in 11 months while headline inflation in September rose to its highest this year at 7.8 per cent (both data points came in October).
Earnings disappointed: Infosys' numbers did not go down well with the Street. Reliance Industries, India's biggest company by market value, reported the fourth consecutive drop in quarterly profit. State run banks reported rising non-performing assets. Most other companies reported margin pressure because of high input costs and slowdown in sales.
Rupee: The Indian currency lost nearly 1.8 per cent in October adding pressure on importers.
RBI's unwillingness to lower rates: The central bank said it will consider a rate cut in the first quarter of next calendar year. Most banks said they will not lower rates despite the RBI cutting CRR. RBI's decision dented sentiments in rate sensitive stocks.
Global markets: Markets in the US and Europe were subdued weighing down in sentiments.
