February 26, 2019 / 5:22 AM / 3 months ago

UPDATE 1-Indian markets slump after air strike on militant camps in Pakistan

* NSE, BSE indexes slide 0.9 pct

* Heavyweights Reliance Ind, HDFC top drags

* Rupee weakens, bond yields rise (Adds analyst comments, shares)

By Krishna V Kurup and Suvashree Choudhury

MUMBAI, Feb 26 (Reuters) - Indian markets dived on Tuesday after the country’s military aircraft conducted air strikes on militant camps inside Pakistan, escalating tensions between the two nuclear-armed neighbours.

India government confirmed the Air Force conducted air strikes on “terror camps” in Pakistan, after Pakistan’s military claimed that Indian jets crossed into its territory and “released a payload” after Pakistan scrambled its own jets, but there was no casualties or damage.

The confrontation follows the Feb. 14 suicide bombing in Kashmir, when 40 Indian paramilitary police were killed by a Pakistani-based militant group. New Delhi blamed Islamabad, which denies having a role in the attack.

The broader NSE index was 0.86 percent lower at 10,787 as of 0510 GMT, while the benchmark BSE index fell 0.88 percent to 35,894.36.

“Markets are reacting to the tension on the border. These situations make markets nervous,” said Deven Choksey, founder and director of KR Choksey Investment Managers.

“Expiry due on Thursday is also adding to the volatility,” Choksey added.

Most shares traded in the red with both the indexes declining more than 1 percent minutes after markets opened.

Index heavyweights on the NSE took a beating, with Reliance Industries Ltd and Housing Development Finance Corp Ltd declining as much as over 2 percent.

“Geopolitical tensions have been running high. So, any news flow is likely to spook the markets,” said Naveen Kulkarni, head of research, Reliance Securities.

Among the decliners, Dewan Housing Finance Corp Ltd fell over 8 percent, a day after ratings agency ICRA downgraded its rating on Dewan’s commercial paper.

Meanwhile, the rupee fell to 71.1375 to the dollar from Monday’s close of 70.9850. Indian bonds opened slightly late after a technical glitch on the trading and clearing platform. The 10-year benchmark bond yield rose to 7.5856 percent compared with 7.5839 percent on Monday.

“People don’t want to run position during such uncertain times,” said a dealer at a foreign bank.

“Had this strike not been there, bond yields would have been lower as crude is down.” (Reporting by Krishna V Kurup in BENGALURU and Suvashree Dey Choudhury in MUMBAI; Editing by Shreejay Sinha and Gopakumar Warrier)

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