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Indian shares were lower on Wednesday morning but had pared their early losses in the wake of India's strikes on Pakistan and Pakistani Kashmir in response to last month's Kashmir attack.
The benchmark Nifty 50 opened 0.6 per cent lower but had cut its losses to 0.2 per cent as of 10:30 a.m. IST. The Sensex was also down 0.2 per cent.
Nine of the 13 sectors were lower, while the broader small-caps were down 0.1 per cent and mid-caps rose 0.3 per cent.
"I'd still be a bit cautious. The market move may not settle so soon," said Dharmesh Kant, head of equity research at Cholamandalam Securities.
India attacked Pakistan and Pakistani Kashmir, and Pakistan said it had shot down five Indian fighter jets in the worst fighting in more than two decades between the nuclear-armed enemies.
The South Asian neighbours had been exchanging shelling and heavy gunfire across much of their de facto border in the Himalayan region of Kashmir since an attack by Islamist militants on Hindu tourists that killed 26 people in Indian Kashmir last month.
People had been taking short positions in the market in anticipation of an Indian retaliation. Now that the news is out, they are covering those positions, Kant said.
Defence stocks were mixed on the day, with Paras Defence and Space Technologies rising about 2 per cent, while Bharat Electronics and Hindustan Aeronautics fluctuated between gains and losses.
Textile stocks soared as the India-U.K. trade deal, clinched on Tuesday, is expected to make Indian textile exports cheaper with zero tariffs, enabling them to compete with China and Bangladesh.
Among individual stocks, Tata Motors jumped 3.2 per cent as shareholders approved splitting the automaker into two listed firms, while the India-UK trade deal is also aiding the stock.
Paytm jumped 6 per cent after the payments firm said it expects to turn profitable this quarter.