Sensex retreats from record closing highs; consolidation seen

MUMBAI (Reuters) - The BSE Sensex fell on Wednesday, retreating from its record closing highs in the previous session as exporters including IT companies such as Tata Consultancy Services dropped amid concerns about the impact of a stronger rupee.

Exporters were among the top decliners in the rally in anticipation of Narendra Modi's victory in general elections last month, as investors preferred domestic-oriented stocks that would benefit from a revival in the economy.

Investors expect some consolidation ahead of the new government's budget, due to be unveiled by early or mid-July.

"After such a great rally, profit-booking is a must in the short term. But India is still in a sweet spot. Expect lot of triggers from the government," said G. Chokkalingam, founder of research and fund advisory company Equinomics.

The benchmark BSE Sensex fell 0.21 percent, or 52.76 points, to end at 24,805.83, retreating from its record closing high hit on Tuesday.

The broader Nifty dropped 0.18 percent, or 13.60 points, to end at 7,402.25, just managing to close above the psychologically important 7,400 level.

Software stocks fell on continued concerns about the stronger rupee. The local currency has gained around 4 percent so far this year and is among the best performers among the Asian currencies tracked by Reuters.

Tata Consultancy Services fell 1.9 percent, Infosys ended lower 1.1 percent and HCL Technologies lost 3 percent.

Among pharmaceutical exporters, Sun Pharmaceutical Industries fell 1.2 percent while Dr.Reddy's Laboratories lost 0.8 percent.

Reliance Industries Ltd fell 1.6 percent after JP Morgan downgraded the stock to "neutral" from "overweight", saying share prices already reflect positive catalysts even as fundamentals remain on "a solid footing".

Bharti Airtel fell 1.8 percent, adding to Tuesday's 0.4 percent decline on profit-taking after surging 5.1 percent on Monday.

However, among stocks that gained, fertiliser companies surged on hopes that the new government will soon clear its 2013/14 outstanding subsidy payments for the sector, dealers said.

Chambal Fertilisers and Chemicals gained 6.2 percent, Rashtriya Chemicals and Fertilizers rose 6.1 percent and National Fertilizers jumped 10 percent.

Insurance companies surged on hopes that the new government may raise foreign direct investment limit in the sector to 49 percent from 26 percent, multiple dealers said.

Max India surged 8.7 percent, Reliance Capital advanced 5.4 percent and Bajaj Finserv BJFS.NS gained 4.4 percent.

(Reporting by Abhishek Vishnoi; Editing by Sunil Nair)