Bengaluru: Shares fell in afternoon trade on Tuesday over fears of escalating tensions with China.
On Monday, an Indian Army officer and two soldiers were killed in a confrontation with Chinese troops in the sensitive Galwan Valley in eastern Ladakh.
It is perhaps the first such incident along the border with China that Indian armed forces personnel have been killed after a gap of nearly 45 years.
The Nifty and the Sensex, which rallied more than 2% earlier on Tuesday on hopes of a liquidity boost from the U.S. corporate bond-buying program, fell 0.5% after the news.
The Nifty 50 was down 0.65% at 9,746.90 by 0748 GMT, while the Sensex slipped 0.77% to 32,012.50. The rupee weakened to 76.30 against the dollar, its lowest since April 28.
"India at this time can't afford to have any faceoff at the border, which is what is making markets jittery, said Neeraj Dewan, director at Quantum Securities in New Delhi.
"Internally, it is under pressure due to the coronavirus situation and any border tensions will be a big blow to the government."
India has been struggling to contain the coronavirus pandemic, with the country's capital fast running out of hospital beds.
The number of COVID-19 cases surged well past 343,000 and deaths were over 9,900 as of Tuesday.
Stocks across the board gave up gains with the Nifty banking index and the financial index falling nearly 1%. Both indexes had surged over 3.5% earlier in the day.
Meanwhile, global stocks were up after the U.S Federal Reserve said it would start purchasing a diversified range of investment-grade U.S. corporate bonds on Tuesday in a bid to secure companies' access to cash and ensure credit market liquidity amid the COVID-19 pandemic.
In Mumbai, shares of Tata Motors Ltd were the top losers on the Nifty 50, falling over 7%. The company had forecast a weak first quarter on Monday.
Shares of oil-to-telecoms conglomerate, Reliance Industries Ltd gave up gains to fall more than 1%.
A large number of Indian and Chinese troops were engaged in an eyeball-to-eyeball situation in Galwan Valley and certain other areas of eastern Ladakh for the last five weeks.
(With inputs from Reuters)
