LONDON/KARACHI: Pakistan's international bonds rose on Wednesday and stocks cut hefty losses after India launched strikes on the country in response to April's tourist killings, sparking the worst fighting in over two decades between the nuclear-armed enemies.

The country's international bonds gained as much as 0.6 cent, clawing back losses of more than 1 cent in early trading, according to Tradeweb data. The 2027 bond, which saw the biggest gains, was bid at just under 90 cents in the dollar.

The country's benchmark share index was down 1.4%, clawing back much of its losses after opening 5.78% lower.

India said it struck nine Pakistani "terrorist infrastructure" sites, some of them linked to an attack by Islamist militants on Hindu tourists that killed 26 people in Indian Kashmir last month, while Islamabad said it had shot down five Indian fighter jets.

The latest escalation comes at a fragile moment for Pakistan, which has emerged from an economic crisis and is trying to shore up finances and make progress on its $7 billion International Monetary Fund loan programme agreed in 2024.

"The reliance of Pakistan on external capital inflow — in recovery from an external account crisis, in the midst of an IMF programme, and with under 3 months of import cover compared to over 9 months in India — makes its asset prices much more sensitive to any conflict than those in India," said Hasnain Malik at Tellimer in Dubai.

The IMF executive board is scheduled to sign off on May 9 on a staff level agreement that would trigger a $1 billion payout as well as Pakistan's new $1.3 billion arrangement under a climate resilience loan program.

"Investors seem optimistic on the upcoming IMF board meeting which will decide on the loan tranche for Pakistan," said Sohail Mohammed, CEO of Topline Securities in Pakistan. (Reporting by Karin Strohecker in London and Ariba Shahid in Karachi; editing by Dhara Ranasinghe and Bernadette Baum)