* India stocks fall 10% from record highs

* Brazil's services sector beats forecasts in January

* Colombian peso set for biggest weekly drop this year

* MSCI LatAm stocks down 1.9%, FX off 1.4%

(Updates with late-afternoon trading)

By Pranav Kashyap and Purvi Agarwal

March 13 (Reuters) - Latin American currencies and

stocks reversed earlier gains to fall on Friday, as a risk-off

wave gripped global markets amid the ongoing Middle East

conflict, now approaching its two-week mark with no resolution

in sight.

A gauge tracking regional equities slid

1.9%, set for a third straight week of declines. A similar index

for Latin American currencies dipped 1.4%,

see-sawing between gains and losses for the week.

Investor appetite for EMs showed signs of strain. Flows into

emerging market bond funds fell in the week to March 11, while

inflows into emerging market equity funds stalled after five

straight weeks of gains, unsettled by the war involving Iran.

Energy prices saw erratic swings as the Strait of Hormuz

remains choked, with governments across emerging markets

spending the week scrambling to shield their economies from the

fallout.

"We are about to enter the third week of the conflict in the

Middle East and the mood is still negative, with risk

aversion maintaining the upper hand," said Societe Generale's

Juan Esteban Valencia.

"We expect the bigger driver of market sentiment to remain

the evolution of the conflict, and any potential signs of

escalation or abatement."

U.S. President Donald Trump said on Friday the country was

going to hit Iran "very hard over the next week".

Analysts expect the performance to diverge in LatAm markets,

with oil exporters such as Brazil and Colombia to benefit

compared to importers such as Chile and Peru.

Geopolitics aside, Latin America saw a packed week of

domestic developments, from a slate of inflation reports and

Colombia revising its fiscal deficit target to Chile ushering in

a new president.

In Brazil, the real weakened 1.5%, the most among

peers. Data showed services activity in January grew slightly

more than expected. The move also came after the Finance

Ministry raised its inflation forecast for the year to 3.7%,

factoring in the impact of higher average oil prices. Stocks in

Sao Paulo were 0.9% lower.

Colombian stocks reversed gains to fall 0.1%. The

local peso was down 0.6%, set for its biggest weekly fall

this year.

Colombia faces a 32.1 trillion peso ($8.67 billion)

shortfall to meet its 2026 fiscal targets, the country's

independent fiscal watchdog said, even before Moody's noted that

it sees the deficit above 6% of its GDP.

Argentine and Chilean equities were set to

end the week with gains, defying the broader emerging-market

gloom. In Santiago, markets welcomed the arrival of Jose Antonio

Kast as president, marking Chile's sharpest political turn to

the right in decades.

Chilean stocks gained 0.7%, the only outliers, while the

peso was flat.

Argentina's stocks fell 2%.

Elsewhere in EMs, Mumbai stocks confirmed a

technical correction, while Johannesburg's market came within a

striking distance of doing the same. By the widely used

definition, a market is said to be in correction territory when

an index ends 10% below its all-time record close.

Equities in Dubai and Doha were down about

36% and 27% from their respective peaks.

Key Latin American stock indexes and currencies:

Latin American market

prices from Reuters

Equities Latest Daily %

change

MSCI Emerging Markets 1465.63 -1.77

MSCI LatAm 2925.29 -1.94

Brazil Bovespa 177614.24 -0.93

Mexico IPC 65768.05 -0.48

Chile IPSA 10469.3 0.67

Argentina Merval 2640392.3 -2.04

3

Colombia COLCAP 2169.77 -0.12

Currencies Latest Daily %

change

Brazil real 5.3191 -1.44

Mexico peso 17.936 -0.48

Chile peso 916.27 0.04

Colombia peso 3699.74 -0.6

Peru sol 3.4495 -0.03

Argentina peso (interbank) 1396.5 0

Argentina peso (parallel) 1395 0.36