A fresh round of brawl between North Korea and South Korea, the presence of

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existing negative cues, including European debt woes, and political unrest over the 2G scam in India dragged the benchmark indices on Tuesday.

The BSE Sensex slid 265.75 points, or 1.33 per cent, to close at 19,691.84. The Nifty index on NSE dropped 75.25 points, or 1.25 per cent, to settle at 5,934.75. RIL and banking stocks led the decline.

“Key indices fell sharply as reports of hostility between the South and North Korea further dampened sentiment, already hit by European debt worries. However, a late recovery in afternoon trading session helped Nifty to trim much of its losses. Going ahead, the undertone continues to be fragile because of anxiety over geo-political situation, alleged corruption in India and the euro zone situation,” said Amar Ambani, head of research at India Infoline.

Reliance Industries declined 1.70 per cent to Rs 994.90. Among the banking stocks, SBI, ICICI Bank and HDFC dipped 2.83 per cent, 1.95 per cent and 1.52 per cent, respectively.

Dipen Shah, senior vice-president of PCG research at Kotak Securities, said this correction can be utilised as an opportunity to buy fundamentally sound stocks with a medium-term perspective.

“The markets turned weak likely on the news of tensions between South Korea and North Korea. We believe while this may have a temporary sentimental impact, the fundamentals of the Indian economy are not expected to be impacted,” he said.

Among the stocks in news, Bajaj Auto bucked the trend and jumped to Rs 1,636.75 on reports that the company plans to increase its dealership network and upgrade its service centers by the next festive season.

Bharati Shipyard climbed 4.15 per cent to Rs 238.55, after the company said it proposes to acquire a majority 51 per cent equity stake in Tebma Shipyards for Rs 75.75 crore.

“On a standalone basis, the acquisition looks quite attractive at an EV/Ebitda of 4xFY12,” said brokerage Prabhudas Lilladher in a note.

M&M inched down 0.87 per cent to Rs 759.70 after the company signed a deal to buy a 70 per cent stake in South Korea’s Ssangyong Motor for $463 million.

Monsanto India inched up 0.16 per cent to Rs 1,832.90 after Monsanto Holdings bought 3.83 lakh shares at Rs 1,830 worth Rs 70 crore, in a single bulk deal from Bretco Holdings.