By Bharath Rajeswaran and Vivek Kumar M
(Reuters) – Indian shares fell further on Friday in a highly volatile session after the army reported overnight drone and munitions attacks by Pakistani forces, stoking fears of escalation that market players had earlier downplayed.
The Nifty 50 was down 1.18% at 23,983.3 and the BSE Sensex lost 1.12% to 79,443.08 as of 10:53 a.m. IST.
Twelve of the 13 major sectors declined. The broader, more domestically focussed small-caps and mid-caps fell 1.8% and 1.2%, respectively.
The volatility index, often referred as the market’s fear gauge, was set for an eighth straight session gain and hit its highest level in over a month.
“The extent of escalation was not anticipated by the market,” said Ambareesh Baliga, an independent market analyst.
Defence stocks rose amid the escalating tensions, with Bharat Electronics and Hindustan Aeronautics adding about 3.4% and 2.1%, respectively.
Blasts rang out across the Indian city of Jammu late on Thursday during a Pakistani drone and missile attack on military stations around the Kashmir region on the second day of cross-border clashes that have so far killed nearly four dozen people.
Two traders told Reuters that they are unwinding “all risk positions”, and that is “the mood that will prevail today and early next week” if military tensions escalate further over the weekend.
The Indian rupee also weakened about 0.1%, and bond yields rose in early trades.
However, analysts said investors are unlikely to pull out of Indian markets entirely due to hopes of a trade deal and the country’s economic resilience.
The U.S. said it is expected to seal dozens of tariff-lowering deals in the coming weeks, after announcing a historic limited bilateral agreement with the UK.
Tata Motors, which makes the luxury Jaguar Land Rover cars in Britain, jumped 2% as multiple brokerages saw the automaker as a key beneficiary of the trade deal.
(Reporting by Bharath Rajeswaran and Vivek Kumar M in Bengaluru; Editing by Nivedita Bhattacharjee, Sherry Jacob-Phillips and Mrigank Dhaniwala)
