Sensex snaps 3-day rally on mounting tension with Pak

The Bombay Stock Exchange (BSE) benchmark index, Sensex, snapped a three-day rally as oil and bank stocks plunged on concern that rising tension with Pakistan following the Mumbai terror attack may hurt India’s economy.

Stocks of the largest private sector lender, ICICI Bank, fell 5.7 per cent, the most in three weeks, after Foreign Minister Pranab Mukherjee said On Monday that India will take all steps needed to combat terrorism emanating from Pakistan.

As if responding to Mukherjee, Pakistani Prime Minister Yousuf Raza Gilani today said their army was ready to defend the country against threats from India. “The country is in safe hands… We have a highly professional army,” he said.

The Sensex declined 171.56, or 1.7 per cent, to close below the 10,000-level at 9,928.35 points. The National Stock Exchange’s (NSE’s) Nifty slid 38.20 points, or 1.2 per cent, to 3,039.30 points. The BSE 200 Index shed 1.3 per cent to 1,181.50 points. Nifty futures for December delivery fell 1.4 per cent to 3,039.35 points.

“The economy will suffer if there is a war on our western border’’ with Pakistan, said R.K. Gupta, who manages the equivalent of about $100 million of stocks at Taurus Mutual Fund in New Delhi.

ICICI Bank suffered a 5.7 per cent fall to Rs 445.70. HDFC Bank, the third biggest bank by market value, dropped 3.2 per cent to Rs 1,018.50, the biggest loss in more than a month.

Rising tension with Pakistan may damp overseas investment and slow economic growth. Growth in India, Asia’s third-largest economy, is already projected to slow to 7 per cent in the year ending March 31 from 9 per cent or more annually in the previous three years as the global slump has come to hurt exports, according to the government.