MUMBAI (Reuters) - The BSE Sensex fell on Tuesday, retreating from 14-month highs hit in the previous session, as Reliance Industries and other recent outperformers fell to profit-booking, while Tata Consultancy Services fell on concerns earnings were slowing in the current quarter.
Caution also prevailed ahead of a meeting by the Trinamool Congress later in the day to review its support for the ruling coalition government, after having strongly opposed recent measures including the hike in diesel prices.
That is setting up some worries India could backtrack from its initiatives, even after Finance Minister P. Chidambaram said on Monday the government has no intention of doing so.
Any hints of a reversal would put at risk a strong rally in domestic stocks, which helped by the Federal Reserve's new asset purchase programme, has attracted 51.1 billion rupees in net foreign inflows in the last two sessions, or about half of what India received for all of August.
"Looking at overall scenario, things are looking positive for markets in the medium term. But definitely some consolidation is expected in near term as markets had run up pretty sharply," said Vaibhav Sanghavi, Director at Ambit Capital.
"We have to now watch how the political equations are settling within allies."
Sensex fell 0.25 percent, or 46.30 points, to end at 18,496.01.
The 50-share Nifty declined 0.18 percent, or 9.95 points, to end at 5,600.05 points.
Financial markets are closed on Wednesday for a religious holiday.
Recent outperforms were hit after nine consecutive days of gains, especially in the last two sessions, when stock investors reacted positively to a string of long-awaited measures from the government.
Reliance Industries(RELI.NS) fell 2.1 percent after its share price on Monday rose above the maximum buy-back price of 870 rupees per share for the first time since the offering was announced on January 20.
Retailers retreated after a strong recent rally sparked by the government's action to open up the multi-brand retail sector to direct foreign investment. Pantaloon Retail(PART.NS) fell 4.2 percent after gaining 27.34 percent over the previous two sessions.
ICICI Bank(ICBK.NS) shares ended 1.1 percent lower after rising 10.55 percent in previous two sessions.
Among other decliners, Tata Consultancy Services(TCS.NS) fell 3.2 percent on concerns about its July-September earnings following an analyst briefing by CFO S. Mahalingam on Monday.
BNP Paribas said the TCS executive reiterated the software services exporter is on track to meet its fiscal 2013 targets, but the brokerage came away from the briefing expecting TCS' Q2 earnings could track "slightly" below BNP's expectations.
Tata Motors(TAMO.NS) shares fell 1.6 percent after reporting on Monday lower-than-expected August JLR vehicle sales.
However, among gainers, Infosys(INFY.NS) rose 1.4 percent after Bank of America Merrill Lynch upgraded the stock to 'buy' from 'neutral' citing improved revenue confidence and hopes of better earnings.
Brokerages gained on hopes for improved stock trading volumes after the recent government and Fed measures saw turnover in the NSE index double on Friday and Monday compared to the daily average in the prior five sessions.
Motilal Oswal(MOFS.NS) gained 8.1 percent, while India Infoline(IIFL.NS) added 5.1 percent.
Shares in some state-owned banks gained on hopes that the government would soon take a decision on restructuring the debts of state electricity boards.
State-owned banks with relatively higher exposure to SEBs rose, with Oriental Bank of Commerce(ORBC.NS) ending up 12.5 percent. Power financiers also gained, with Power Finance Corp (PWFC.NS) rallying 7.8 percent.
(Additional reporting by Abhishek Vishnoi)