The BSE Sensex posted its biggest monthly gain in seven months, even as it snapped a four-day winning streak on Monday, edging down 0.6 percent by close as risk-wary investors locked in profits and stayed away from fresh buying.
Software and financial stocks ended higher, buoyed by strong results in key sector companies, but index heavyweight Reliance Industries Ltd and automobile stocks counted among the main losses.
Sentiment was dampened as world equities fell after commodities retreated, prompted by the dollar rising to a three-month high against the yen after Japan intervened to weaken its currency, spurring some profit-taking after last week's rally.
The 30-share BSE index ended down 99.79 points, or 0.56 percent at 17,705.01, after briefly turning positive at one stage. Twenty-three of its components ended lower.
The index, however, posted gains of 7.6 percent for October, its best monthly performance since March.
The index had logged its biggest weekly gain in nearly two months last week, after it ended up 6.1 percent, bolstered by hopes of an end to the long monetary policy tightening cycle in Asia's third-largest economy.
"People have been holding stocks waiting for the right price, so there has been profit booking, especially from local investors," said Hitesh Dang, vice president for institutional sales at Jaypee Capital.
Energy major Reliance Industries, which has the highest weightage on the index, fell 2.5 percent to 877.55 rupees. The stock, which has risen nearly 10 percent in October, saw profit booking at higher levels. It is still down 17.1 percent so far in 2011, underperforming the main index.
Shares in automakers also suffered on increasing concerns about growth outlook after the country's top car maker Maruti Suzuki India Ltd posted a sharp fall in quarterly profit, hit by labour unrest at its key plants and rising interest rates.
Maruti ended down 0.1 percent, after falling as much as 5.9 percent. Tata Motors Ltd , Mahindra and Mahindra Ltd and Bajaj Auto Ltd declined between 1 and 4 percent.
Non-ferrous metals producers Sterlite Industries (India) Ltd and Hindalco Industries Ltd ended down 4.1 percent each, hurt by the fall in copper and aluminium futures in the London and Shanghai markets.
Gains for the session were led by consumer goods maker Hindustan Unilever Ltd , which rose to an all-time high of 378.15 rupees after it beat forecasts with a 21 percent jump in quarterly net profit. Its shares ended up 7.1 percent at 375.80 rupees.
Software stocks ended lower on profit booking, but had traded higher through most of the session after No. 3 software services exporter Wipro Ltd beat brokerage estimates with its quarterly profit and forecast better-than-expected IT services revenue growth despite global uncertainty.
Wipro shares ended 2 percent lower, after having risen as much as 3 percent in trading. Larger rivals Infosys Ltd ended up 0.7 percent, while sector leader Tata Consultancy Services Ltd slipped 0.5 percent.
Shares in India's No 2 lender lender ICICI Bank Ltd closed lower after rising as much as 2.2 percent as it beat street estimates with a 21.6 percent rise in second-quarter profit, led by higher income from interest and investments, and lower provisions for bad loans.
Shares in rival HDFC Bank Ltd, however, ended 1.5 percent higher.
The 50-share NSE index closed down 0.64 percent at 5,326.60 points.
In the broader market, gainers narrowly outpaced declines in the ratio of 1.1:1 on strong volume of about 609 million shares.
TOP THREE BY VOLUME
* Unitech Ltd on 23.9 million shares
* Lanco Infratech Ltd on 22.3 million shares
* GVK Power and Infrastructure Ltd on 20.4 million shares
STOCKS THAT MOVED
* Tata Global Beverages Ltd rose 3.2 percent to 92.60 rupees after the world's second-largest tea group posted a 49 percent jump in September-quarter net profit on better performance in overseas markets and price increases from earlier this year.
* Redington (India) Ltd rose 2.2 percent to 95.05 rupees after the technology products distributor said July-September net jumped nearly a quarter to 612.7 million rupees.
(Reporting by Prashant Mehra; Editing by Aradhana Aravindan)