Indian shares, bonds and the rupee fell sharply on Thursday after India attacked suspected militants in Pakistan, raising political tensions just days before the RBI is set to hold a policy review.
India has conducted "surgical strikes" on suspected militants in Pakistan it suspects of preparing to infiltrate into the part of Kashmir it controls, the army's director general of military operations said on Thursday.
Investors had already been growing cautious ahead of the Reserve Bank of India's policy review on Tuesday.
The Nifty was down 1.5 percent after falling as much 2.07 percent.
Benchmark 10-year bond yields were up 8 basis points at 7.00 percent from its previous close while the rupee weakened to 66.80/81 from its close of 66.46 on Wednesday.
(Reporting by Darshana Sankararaman in Bengaluru and Suvashree Dey Choudhury in Mumbai; Editing by Kim Coghill)