Sensex falls on profit-taking after record high

By Abhishek Vishnoi

MUMBAI (Reuters) - The BSE Sensex and the Nifty retreated on Tuesday from record highs hit in the previous session as a rally sparked by the strong showing by the key opposition party in state elections faded, with investors booking profits in blue-chips such as ICICI Bank.

Results on Sunday showed the Hindu nationalist Bharatiya Janata Party (BJP) swept three out of four key state elections held since last month, delivering a blow to the ruling Congress party and bolstering the prospects of opposition prime minister candidate Narendra Modi in national polls due by May next year.

Some of the caution setting in was also tied to the industrial output and consumer inflation data due on Thursday, which will help set expectations ahead of the central bank's policy review on December 18.

Still on a positive note, foreign investors bought Indian cash shares and derivatives worth $1 billion on Monday, bringing their total for the year so far to over 1 trillion rupees.

"I think market should consolidate before it picks up once again on liquidity. A 25-basis-point rate increase by RBI is already factored in," said Paras Adenwala, managing director and principal portfolio manager at Capital Portfolio Advisors.

The Sensex fell 0.33 percent, or 71.16 points, to end at 21,255.26, retreating from its record high of 21,483.74 made on Monday.

The Nifty fell 0.49 percent, or 31.05 points, to end at 6,332.85, from an all-time high of 6,415.25 hit on Monday.

Both indexes snapped a three-day winning streak with other analysts uncertain about whether the rally can sustain this week.

"Indian shares can look at some consolidation as traders would digest sentiments, fundamentals, Fed tapering and RBI policy," said Brenda Kelly, analyst at IG Markets in London, late on Monday.

Shares that rallied on Monday turned into leading decliners on Tuesday. ICICI Bank Ltd fell 3.6 percent, Larsen and Toubro Ltd lost 4.1 percent, while Bharat Heavy Electricals ended 5 percent lower.

Bank shares fell 1.8 percent, retracing from their six-month high made on Monday.

Axis Bank fell 3 percent while State Bank of India ended 2.5 percent lower.

In addition, shares of electricity utilities dropped after the power regulator tightened certain rules for tariffs and operations for the sector in its draft 2014-19 guidelines. NTPC slumped 11.4 percent.

Apart from NTPC, Power Grid Corp of India fell 2.9 percent, while Tata Power Co declined 1.5 percent.

However, among stocks that rose, Ess Dee Aluminium gained 7.3 percent, having earlier risen as much as 9.7 percent, after the central bank on Monday allowed the company to increase foreign investment limit on its shares.

(Editing by Sunil Nair)