Indian stock markets went into a tailspin on Thursday mid-session after the Indian Army said at a press conference that it conducted surgical strikes on terrorists across the Line of Control (LoC) in Pakistan on Wednesday night. The press conference was addressed jointly by the defence ministry and external affairs ministry.
In the morning, the benchmark indices had opened on a positive note.
The instability in currency and stock markets will be passing phase and it would be business as usual soon, a senior Indian finance ministry official said.
"The markets including the currency markets, the stock market they will stabilise in a matter of a very, very few days," Economic Affairs Secretary Shaktikanta Das told reporters in New Delhi, reports Reuters.
The markets crashed in the afternoon and lost as much as 572 points at the day's low of 27,719, but staged a modest recovery to close at 27,827, down 465 points, or 1.64 percent.
The broader, NSE Nifty ended 154 points, or 1.76 percent, at 8,591.
The rupee ended at 66.85 to the US dollar.
Terrorism-biggest threat to our financial & economic stability and growth.Decisive action against terrorism will spur growth and stability
â€” Shaktikanta Das (@DasShaktikanta) September 29, 2016
Finance Minister Arun Jaitley lauded Indian Army's capabilities to hit those who are enemies of peace in the region.
â€” Arun Jaitley (@arunjaitley) September 29, 2016
Top Sensex losers included Adani Ports, Sun Pharma, ICICI Bank, GAIL (India) and Tata Steel.
Among sectoral indices on the BSE, the Bankex lost 2.43 percent, Auto 2.13 percent, Realty 6.3 percent, Healthcare 3.26 percent, Utilities 3.49 percent and Industrials 3.29 percent.
ICICI Prudential Life Insurance Company, which debuted on the stock exchanges on Thursday, listed at a discount to the issue price of Rs. 334 and ended at Rs. 297.65, down 10.88 percent to the issue price.
The uncertainty could stay in view of the geo-political situation after the surgical strikes on terrorist camps.
"Markets may remain under pressure over uncertainty about geopolitical situation between two countries and take wait and watch approach in the short term," Dinesh Thakkar, CMD, Angel Broking, said in a note.
"It is pertinent to note that during 1999 Kargil war, markets eventually bounced back with more than 13% gains between the start to the end of the war. In my view, once the current issue also de-escalates, the markets will revert back to its fundamentals which remain strong for India," he added.