Domestic stocks and rupee weakened on Tuesday after investors turned cautious following flaring up of tensions with Pakistan. The suspected terrorist attack in the UK and reports against the Trump administration on collusion with Russia also weighed on investor sentiment.
The benchmark Sensex lost 205 points, or 0.67 per cent to close at 30,365, while the Nifty closed at 9,386, down 52 points or 0.55 per cent. The broader market saw a steeper correction with the BSE Midcap index dropping 1.6 per cent. The rupee fell 0.53 per cent to close at 64.89 against the dollar.
The Indian army, during the trading hours, announced that it had entered Pakistan-occupied Kashmir to destroy terror camps. The Indian markets had opened weak in Tuesday's trade but had erased most of the day's losses ahead of the Army's announcement.
"Factors like these always create some nervousness in the market. During the last hour of trading, we saw a bout of selling by investors due to the brewing tensions between India and Pakistan. If the situation escalates further, it could trigger a correction in the markets. However, the impact would depend on how long the issue will stretch out," said Rikesh Parikh, vice-president, corporate broking, Motilal Oswal Financial Services.
Experts said the rise of geopolitical concerns in Asia and around the world could be a risk for the market
"Global developments could have a significant impact on Indian markets. We are seeing some selling by foreign investors. There could be to redemptions in emerging market (EM) exchange traded funds (ETFs)," said Prateek Agrawal, chief investment officer(CIO), ASK Investment Managers.
Foreign portfolio investors (FPIs) sold Rs 400 crore worth of equities during the session, while domestic institutions bought Rs 352crore, provisional data from stock exchanges showed.
Among Sensex components, Adani Ports fell the most at 6.2 per cent. Shares of Cipla and Sun Pharma lost 4.9 per cent and 4.3 per cent respectively.
