The Sensex and the Nifty finished in the red after risingduring the early trading on Wednesday. The S&P BSE Sensex ended the day68.28 points (0.19 per cent) lower at 35,905.43, while the Nifty 50 settled at10,806.65, down 28.65 points (0.26 per cent).
The Sensex fell over 600 points at around 11 a.m. from itsday's high following reports that Pakistani jets had violated the Indian airspace.
It was seen as a major escalation in the already tenseIndia-Pakistan ties following the February 14 Pulwamaattack in which 40 CRPFtroopers were killed.
A day after the Reserve Bank of India (RBI) removedAllahabad Bank, Corporation Bank and Dhanlaxmi Bank from the prompt correctiveaction (PCA) framework, PSU banks stocks surged on Wednesday.
"As the developments were spontaneous in nature,markets gave a knee-jerk reaction. However, markets have become mature and amajor fall will only come if actual war breaks out," said Vinod Nair, Headof Research, Geojit Financial Services.
The markets erased opening gains over escalation in bordertensions. The 10-year yield inched higher as any war-like situation will impactliquidity in the system, he said.
"While foreign institutional investor (FIIs) remainedpositive, market participants did not rule out the possibility of slowdown ininflow if the market remains range bound," Nair said.
According to analysts, given the spontaneous developmentsinvestors believed that volatility will continue in the short term.
The top index performers on the Sensex were BhartiAirtel,Bajaj Auto, Larsen and Toubro, Sun Pharma and Axis Bank, and laggards TataMotors (DVR), Tata Motors, Vedanta, Hindustan Uniliver and Kotak Mahindra Bank.