The benchmark BSE Sensex crashed 440 points as the Indian Army today inflicted “heavy casualties” on NSCN(K) cadre during an operation along the India-Myanmar border.
Domestic market extended its losing streak for the seventh straight session.
All BSE sectoral indices ended in the negative zone. Among them, realty index plunged 2.66 per cent, followed by healthcare 2.55 per cent, capital goods 2.16 per cent and power 2.15 per cent.
Top five Sensex losers were Adani Ports (-4.85%), State Bank of India (-2.89%), Reliance (-2.51%), Dr Reddy's (-2.5%) and Sun Pharma (-2.46%), while the only two gainers were TCS (+0.62%) and Coal India (+0.25%).
Factors weighing on domestic sentiment
The rupee sunk to a more than six-month low on foreign fund outflows. Expectations of a rate hike by the US Federal Reserve and lingering North Korean worries also dented the risk appetite.
President Donald Trump has warned North Korea any US military option would be “devastating” for Pyongyang, but said the use of force was not Washington's first option to deal with the North's ballistic and nuclear weapons programme.
Foreign fund outflows have taken a toll on the rupee which on Wednesday fell to as low as 65.77 per dollar, its weakest since March 15.
Foreign investors have net sold $777 million worth of Indian shares so far this month. They sold nearly $2 billion worth of equities in August as stretched valuations and simmering North Korea tensions saw foreign investors pulling out.
The US Federal Reserve had last week reiterated it would continue gradually raising interest rates, including once more this year.
Asian shares
Asian shares rose on Wednesday as investors hoped for progress on major tax reform in the United States, while the dollar hovered near one-month highs on growing expectations of a US interest rate increase in December.
MSCI's broadest index of Asia-Pacific shares outside Japan added 0.2 per cent, after falling for four straight days to a three-week trough. Japan's Nikkei was off 0.5 per cent, with some stocks trading ex-dividend, while Australia's main index eased 0.3 per cent.
The S&P 500 had ended flat on Tuesday and the Nasdaq posted modest gains as technology shares bounced from sharp losses in the prior session and comments from Fed Chair Janet Yellen boosted expectations of a December rate hike.
The Dow Jones Industrial Average fell 10.05 points or 0.05 per cent to 22,286.04, the S&P 500 gained 0.23 points or 0.01 per cent to 2,496.89 and the Nasdaq Composite added 9.57 points or 0.15 per cent to 6,380.16.