Cross-border tensions hit profit booking in midcap index; stocks slip up to 10%

A broker looks at a terminal while trading at a stock brokerage firm in Mumbai November 6, 2008. Indian shares fell 3.8 percent on Thursday to their lowest close in a week, caught in a broad global sell-off on fears of a deep U.S. recession, while higher-than-expected inflation data added to the pain late on. REUTERS/Arko Datta (INDIA) - RTXABJW

The broader market led the decline on D-Street with both S&P BSE Midcap and Smallcap indices falling over 1 percent each. The benchmark indices gave up gains after media reports highlighted cross-border tension with Pakistan across LoC.

Selling pressure intensified on the D-Street for the second day in a row after several Pakistan media reports claimed that tensions across the LoC intensified as Pakistan Air Force’s jet fighter planes made flights near the Siachen glacier during the day.

However, Indian Air Force sources said there was no violation of India's airspace. Earlier today, PAF declared its all forward air bases operational, Pak news channel said.

The escalating tensions between Pakistan and India had a rub-off effect on stocks markets. Benchmark indices which started with a gap on the higher side gap up most of its gains and turned negative in afternoon trade.

The market is likely to remain volatile amid escalating geopolitical tensions. However, the long-term structural story remains intact and investors should use dips to buy into quality stocks.

“The market will always take cognisance of anything that increases the volatility. If there is a large dip because of such incidents it should be seen as an opportunity to buy,” Vk Sharma - Head of Business, Private Client Group at HDFC Securities told Moneycontrol.

“Besides, what happened on Tuesday was an event, which the Army chose to show on its own. Such actions presuppose that enough thought has gone behind airing of that incident. This means the preparedness is huge to contain the aftermath,” he said.

The S&P BSE midcap index slipped by about 200 points, led by losses in Max Financial Services slipped 9 percent, Videocon Industries down 9.9 percent, and Reliance Communications down 6.4 percent.

The S&P BSE Smallcap index dropped nearly 200 points, led by losses in NCC which slipped 8.7 percent, followed by SeQuent which fell 7 percent, and Saurashtra Cement cracked 7.3 percent.