By Abhishek Vishnoi
MUMBAI (Reuters) - The BSE Sensex fell on Tuesday, retreating from a nearly three-year high hit earlier in the session, as blue chips declined ahead of the October 17 deadline to lift the U.S. debt ceiling.
Lenders also led decliners after data showing higher-than-expected headline and retail inflation on Monday sparked concerns the central bank would raise interest rates this month.
Indian shares snapped five day of gains, totalling 3.6 percent as of Monday's close, on profit-taking, dealers said.
Markets are shut on Wednesday for a public holiday.
Also, a Morgan Stanley survey of 95 institutional investors said investors have turned "equal-weight" on Indian stocks with only 21 percent of the investors being "overweight" on India versus 39 percent in February.
"Recent outperformance is weighing. Earnings are important but U.S. debt ceiling risk and RBI policy would take centrestage from here onwards," said G. Chokkalingam, managing director and chief investment officer, Centrum Wealth Management.
The Sensex fell 0.29 percent, or 59.92 points, to end at 20,547.62, earlier hitting its highest intraday level since November 2010.
The Nifty fell 0.39 percent, or 23.65 points, to end at 6,089.05, snapping its five-day winning streak.
Higher odds of a rate hike in October after higher-than-expected headline and retail inflation data on Monday weighed on banking stocks.
India's No.3 lender by assets HDFC Bank
However, among gainers, Nestle India
Tata Consultancy Services
(Editing by Sunil Nair)