The S&P BSE Sensex index fell as much as 1,069 points from the day's highest level and the broader Nifty 50 benchmark touched an intraday low of 9,728.50, after tensions between India and China rose along the border in Ladakh. An Indian army officer and two soldiers were killed in a "violent face-off" on Monday night with Chinese soldiers at Galwan Valley in Ladakh, in a massive escalation at a time there were efforts to defuse weeks of tension at the border. Senior military representatives of both sides are meeting currently, according to an official statement on Tuesday.
At 2:03 pm, the Sensex was up 118 points or o.36 per cent at 33,346.96 and Nifty was at 9,855.20, up 0.42 per cent or 41 points.
"The markets came off the intraday highs after reports of rising tensions between India and China along the Line of Actual Control (LAC) in Ladakh," AK Prabhakar, head of research at IDBI Capital, told NDTV over phone.
Earlier in the day, benchmarks surged on positive global cues as risk appetite was bolstered by the formal start of the Federal Reserve's corporate bond buying programme.
Army sources say the soldiers were not shot but were killed in hand-to-hand combat on Indian Territory.
The official statement said: "During the de-escalation process underway in the Galwan Valley, a violent face-off took place yesterday night with casualties. The loss of lives on the Indian side includes an officer and two soldiers. Senior military officials of the two sides are currently meeting at the venue to defuse the situation."
Meanwhile, seven of 11 sector gauges compiled by the National Stock Exchange traded lower, led by a fall of over 2 per cent in the Nifty PSU Bank index. The Nifty Pharma, Realty and FMCG indices also fell between 0.5 per cent and 1.2 per cent.
On the other hand, the Nifty Financial Services index was the top gainer, up 0.8 per cent.
Mid- and small-cap shares traded on a lacklustre note, with the Nifty Midcap 100 index down 0.25 per cent and the NIfty Smallcap 100 down 1.2 per cent.
UPL was the top Nifty gainer, up 3 per cent at Rs 418. JSW Steel, HDFC, Hindalco, HDFC Bank, Infosys, Hero MotoCorp, ICICI Bank and HCL Technologies were also among the gainers.
On the flipside, Tata Motors was the top Nifty loser; the stock dropped 6.6 per cent to Rs 94 after the auto maker reported a loss of Rs 9,894 crore in the March quarter, against a profit of Rs 1,117 crore in the corresponding period last year.
Axis Bank, IndusInd Bank, GAIL India, Tech Mahindra, ITC, Bharti Infratel, Indian Oil, Bharti Airtel and Coal India were also among the losers.
Overall market breadth was negative, as 1,439 shares declined while 1,038 advanced on the BSE at the time.