Indian equities pared gains in a volatile session, while the rupee and sovereign bonds declined, after a skirmish between the nation’s soldiers and Chinese troops in a border area reignited geopolitical risks.
The S&P BSE Sensex Index rose 1.1% to close at 33,605.22 points in Mumbai, trimming an intra-day advance of 2.4%, after the Indian army said three soldiers died in the face off. The NSE Nifty 50 Index added 1%. The yield on the most traded 6.45% 2029 bond rose by five basis point to 6.03%, while the rupee weakened 0.2% to 76.2125 per US dollar.
“The loss of lives is hitting investor sentiment,” said Rahul Sharma, head of research at Mumbai-based Equity99 Advisors. “There’s already negativity due to the spike in number of coronavirus infections.”
There were “casualties on both sides,” an Indian army spokesman said in New Delhi Tuesday, adding that officials were meeting to defuse the situation. The clash comes as India begins to reopen business after an extended lockdown even as coronavirus cases continue to climb.
“The China news rattled the market sentiment and that’s getting reflected in market moves,” says Harish Agarwal, a trader with FirstRand Bank Ltd in Mumbai.
Ten of 19 sector sub-indexes compiled by BSE Ltd advanced, led by a measure of finance stocks. HDFC Bank Ltd gave the Sensex its biggest boost and had the largest gain of 4.2%
ITC Ltd was the biggest drag on the index, declining 1.2% while Tech Mahindra Ltd had the biggest drop, falling 2.8%.
Meanwhile the rupee weakened against the US dollar for the fourth consecutive day yesterday after the army said three soldiers were killed in a face-off with Chinese troops along the Line of Actual Control in Ladakh.
The Indian currency closed at 76.21 a dollar, down 0.24% from its previous close. The rupee had opened at 75.89 and touched a high of 75.78 and a low of 76.30. 
“During the de-escalation process underway in the Galwan Valley, a violent face-off took place on Monday 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,” the Indian Army said in a statement. This statement was later amended to add that there were “casualties on both sides”.
Among Asian currenies, South Korean Won gained 0.76%, Philippines peso was up 0.59% and Taiwan dollar rose 0.19%. However, Thai baht lost 0.43%, Japanese yen was down 0.03% and Hong Kong dollar fell 0.01%.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, fell 0.17% to 96.54.