Pakistan and India accused each other of launching drone attacks on Thursday, and Islamabad’s Defence Minister said further retaliation was “increasingly certain”, on the second day of major clashes between the nuclear-armed neighbours.

Pakistan said it shot down 25 drones from India, while India said it air defences had stopped Pakistani drone and missile attacks on military targets, dashing hopes they would soon bow to pressure to end their worst confrontation in more than two decades.

World powers from the US to Russia and China have called for calm in one of the world's most dangerous, and most populated, nuclear flashpoint regions. The US Consulate General in Pakistan's Lahore ordered staff to shelter in place.

Thursday's reported exchanges came a day after India said it hit nine "terrorist infrastructure" sites in Pakistan in retaliation for what it says was a deadly Islamabad-backed attack in Indian Kashmir on April 22.

Pakistan says it was not involved and denied that any of the sites hit by India were militant bases. It said it shot down five Indian aircraft on Wednesday, a report the Indian embassy in Beijing dismissed as "misinformation".

Pakistani retaliation "is increasingly becoming certain now," Pakistan's Defence Minister, Khawaja Muhammad Asif, told Reuters. "I will still refrain from saying it is 100%. But the situation has become very difficult. We have to respond."

The relationship between India and Pakistan has been fraught with tension since they gained independence from colonial Britain in 1947.

The countries have fought three wars, two of them over Kashmir, and clashed many times.

The countries that both claim Kashmir in full and rule over parts of it separately acquired nuclear weapons in the 1990s.

Trading Halted

Trading was halted on Pakistan's benchmark share index (.KSE), opens new tab after the index slumped 6.3% on news of the drone attacks.

Pakistan's international bonds extended their losses with the 2036 bond down 2.4 cents to bid at 72.4 cents.

Indian equities, rupee and bonds fell sharply in late afternoon trading after the Indian defence ministry statement, with the stock market benchmark Nifty 50 (.NSEI), opens new tab settling 0.58% lower in the most volatile trading session in a month.

Pakistan shot down 25 Israeli-made drones from India at multiple locations, including the two largest cities of Karachi and Lahore, and their debris is being collected, Pakistan military spokesperson Ahmed Sharif Chaudhry said.

One drone was also shot down over the garrison city of Rawalpindi, home to the Pakistan army's heavily fortified headquarters, he added.

One drone hit a military target near Lahore and four personnel of the Pakistan army were injured in this attack, Chaudhry said.

"Indian drones continue to be sent into Pakistan airspace...(India) will continue to pay dearly for this naked aggression," he said.

The Indian defence ministry said Pakistan attempted to engage a number of military targets in northern and western India from Wednesday night into Thursday morning and they were "neutralised" by Indian air defence systems.

In response, Indian forces targeted air defence radars and systems at a number of locations in Pakistan on Thursday, the ministry said. The "Indian response has been in the same domain with the same intensity as Pakistan," it added.

The Indian ministry accused Pakistan of increasing the intensity of its firing across the ceasefire line, the de facto border, in Kashmir. Sixteen people, including five children and three women, were killed on the Indian side, the statement said.

Pakistan says at least 31 of its civilians were killed and about 50 wounded in Wednesday's strikes and in cross-border shelling across the frontier in Kashmir that followed, while India says 13 of its civilians died and 59 were wounded.

On Thursday, Indian government ministers told a meeting of political parties in New Delhi that the strikes on Pakistan had killed more than 100 militants and that the count was still ongoing, government sources said.

Pakistan's Information Minister Attaullah Tarar told parliament that Pakistani forces had killed 40-50 Indian soldiers on the de-facto border in Kashmir and "blown" Indian military installations.

Reuters could not independently verify claims of both countries.

Blackout drills were conducted in India's border regions on Wednesday night.

Local media reported panic buying in some cities in the Indian state of Punjab which shares a border with Pakistan, as people hoarded essentials fearing a Pakistani retaliation to the Indian strikes.

Indian Foreign Minister Subrahmanyam Jaishankar said New Delhi did not intend to escalate the situation. "However, if there are military attacks on us, there should be no doubt that it will be met with a very, very firm response," he said at a India-Iran Joint Commission Meeting.

His Pakistani counterpart, Ishaq Dar, told Reuters that there have been contacts between the offices of the national security advisers of the two countries and the hotline between their heads of military operations was also working. He did not give more details.