Indian stocks and the rupee tumbled on Thursday after the Indian Army said it carried out strikes against terrorist camps across the Line of Control in Pakistan-controlled Kashmir.
The strikes were in retaliation to an attack on an Indian army camp in Jammu and Kashmir earlier this month that left 18 soldiers dead. India blamed terrorists from Pakistan for the attack, but Islamabad denied its involvement.
Although the Indian Army said it doesn’t plan any more strikes, sentiment turned cautious as this is the biggest escalation in hostilities between the two nuclear-armed nations since the 1999 Kargil war.
The BSE Sensex opened higher after oil cartel OPEC decided to cut output for the time first since 2008 to support weak prices. But the 30-stock benchmark slumped after the army’s announcement and closed 465 points, or 1.64%, down at 27,827.53 points. The rupee slipped 0.6% to trade near 66.89 against the US dollar.
The drop in stocks is the biggest single-day fall since 24 June, when the markets slumped after Britain’s decision to exit the European Union.
All but one of the 30 Sensex stocks closed in the red. Tata Consultancy Services, India’s biggest software services exporter, was the only exception. Billionaire Gautam Adani-led Adani Ports, operator of a port on the coast of Gujarat, which shares a border with Pakistan, was the biggest loser as its shares fell 5%.
Sun Pharmaceutical, ICICI Bank, state-run gas transporter GAIL, Tata Steel and drugmaker Lupin all dropped more than 3%.
Indian officials sought to soothe investors’ worries later in the day. Economic affairs secretary Shaktikanta Das told reporters he expects stock and currency markets to stabilise in a few days. Separately, Das tweeted: “Terrorism biggest threat to our financial and economic stability and growth. Decision action against terrorism will spur growth and stability.”
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