Pakistan, May 10 -- The losses followed rising military tensions with Pakistan, which launched a counterattack under "Operation Bunyan-un-Marsoos." This move came in response to Indian missile strikes earlier in the week. The Nifty 50 and BSE Sensex both fell 1.1% on Friday, ending a three-week rally. At one point, losses approached $108 billion before a mild recovery.

Experts say traders are now driven more by war headlines than market data. India's "fear index" spiked for the eighth straight session. Sectoral losses were widespread-12 out of 13 indexes closed in the red. Small- and mid-cap stocks fell hardest, down 1.9% and 0.8%. Meanwhile, the Indian rupee weakened, forcing central bank intervention.

India accused Pakistan of backing...