INDIA STOCKS-Indian shares fall as tensions with Pakistan escalate

By Vivek Kumar M and Bharath Rajeswaran

May 8 (Reuters) - Indian shares fell on Thursday in their most volatile session in a month after the country said it "neutralised" attempts by Pakistan to "engage" several military targets in its northern and western regions.

The Nifty 50 .NSEI settled 0.58% lower at 24,273.8 and the BSE Sensex .BSESN fell 0.51% to 80,334.81 after struggling for direction in the early part of the day.

Indian forces targeted air defence radars and systems at a number of locations in Pakistan, they said late afternoon, while Pakistan's military said it had shot down 25 Indian drones.

The developments triggered broad-based selling, multiple analysts said, with the benchmark Nifty 50 falling as much as 1.1%.

"These ups and downs will happen. The tensions are not completely out of the way," said Arun Malhotra, fund manager at CapGrow Capital.

The volatility index .NIFVIX, often called the "fear" gauge, jumped to 21.01, its highest closing level since April 9.

"A prolonged conflict will definitely impact capital inflows and hurt the Indian economy," said Vineet Arora, managing director at NAV Capital.

"Conflict is a reminder of geopolitical risks inherent in the subcontinent and could temper market momentum in near term," he said.

Tensions between the two neighbours have been on the rise since attacks on Hindu tourists in Kashmir last month.

While the tensions prompted caution, foreign portfolio investors (FPIs) remained buyers in India for the fifteenth consecutive session on Wednesday, signalling hopes of a U.S. trade deal and India's economic resilience.

Barring information technology, all the other major indexes logged losses. The broader small-caps .NIFSMCP100 and mid-caps .NIFMDCP100 tumbled 1.4% and 2%, respectively.

Among individual stocks, Asian Paints ASPN.NS dropped 1.4% after it posted lower-than-expected fourth quarter profit due to weak retail demand for its decorative paints and losses from the sale of its Indonesian business.