Armed guerrillas from Pakistan appeared today to be melting away from positions in Indian Kashmir that they have occupied since April, bringing to a close the border conflict that brought two neighboring nuclear powers closer to war than at any time in almost three decades.

Indian officials had set today as the deadline for all the foreign-based fighters to pull out from the mountainous border zone -- two months after they stunned India's army by slipping across the Line of Control that divides Kashmir, and 12 days after Pakistani Prime Minister Nawaz Sharif assured President Clinton that he would secure their withdrawal. This morning India extended its ultimatum another day, noting that it was taking extra time for the guerrillas to retreat across the difficult terrain high in the Himalayas.

At the same time, Col. Bikram Singh, India's military spokesman, said in New Delhi that Indian forces "have not withdrawn from the sector, and we are well poised to counter any nefarious designs of the enemy."

But all indications here in the war zone -- from the carefree looks on Indian soldiers' faces, to the unmanned and tarpaulin-covered artillery pieces lining the single-lane highway that parallels the Line of Control -- suggested today that this volatile phase in the 52-year conflict over Kashmir essentially has ended.

"I just called my mother and my wife and told them, `Don't worry about me, it's all over,' " said Kunal Gurung, 22, a foot soldier from Assam who was resting beside the highway with his platoon. "If they still want to fight, we are ready. But if it's peace, we welcome it."

Even though peace does seem at hand, the eight-week border conflict has taken a heavy and perhaps lasting toll on relations between India and Pakistan, two rival neighbors and nuclear powers whose principal bone of contention has long been their competing claim to Kashmir.

Pakistan's Sharif has called for a resumption of dialogue on Kashmir and other bilateral issues. In an address to the nation Monday in which he explained his reasons for calling back the insurgents, Sharif invited Indian Prime Minister Atal Bihari Vajpayee to meet with him.

But Vajpayee's response has been cool. On Thursday, he said Pakistan had betrayed India by planning the guerrilla invasion around Kargil even as the two prime ministers were holding their historic meeting last February in Lahore, Pakistan, in which they agreed to resolve all disputes peacefully. Now, Vajpayee said, the onus is on Pakistan to prove worthy of resuming talks.

This week, several analysts in New Delhi said the Kargil conflict had poisoned what has come to be known the "spirit of Lahore."

"The lesson of Kargil is that we must keep working for better relations, but we should not allow ourselves such wild emotional swayings" as the popular euphoria that greeted the Lahore meeting, said Jasjit Singh, director of the Institute of Defense Studies and Analysis. "The other lesson is that despite the nuclear overhang, conventional war can still occur, so we must strengthen our military preparedness."

Pakistan's hope for foreign mediation in the Kashmir dispute -- a long-held desire that some observers have pointed to as the motivation for the guerrilla incursion -- also seems overdrawn. In explaining his decision to call back the fighters, Sharif said he wanted to give international diplomacy a chance to solve the crisis, and he referred repeatedly to Clinton's pledge to take a "personal interest" in the issue. But diplomatic sources have said Clinton's promise was intentionally made as vague as possible, and that there is little chance the United States will take an active role in the dispute, which India has always insisted must be resolved bilaterally.

The heightened feeling of suspicion and anger against Pakistan is especially evident among India's military forces, whose casualties from Kargil now stand at 407 troops killed and 584 wounded, according to Indian officials.

Many officials and soldiers interviewed in the conflict zone today said they had no confidence that Pakistan would honor its commitment to withdraw, and some bitterly accused the Islamic republic of trying to spread Muslim fundamentalism through violence.

"I hope this is over, but knowing Pakistan, they could still do anything any time," said Col. Yadoo Pradeep, a logistics officer in Dras. "The troops know we are victorious, and the whole world knows it, but we cannot let down our guard."

During the weeks of conflict, authorities in Pakistan denied having any knowledge of or control over the guerrillas, saying they were independent Muslim warriors, or mujaheddin, from Kashmir. Likewise, Islamic militant groups in Pakistan portrayed their forces as chiefly composed of trained Kashmiri exiles, equally inspired by Islam and the desire to free India's portion of majority-Muslim Kashmir from New Delhi's control.

But Indian officials, American analysts and some Pakistani sources say it is an open secret that most of the intruders were Pakistani soldiers in disguise. Pakistan has feigned ignorance, they say, to protect itself from the wrath of Washington, which holds sway over international loans that are essential to Pakistan's crumbling economy and has threatened to brand Pakistan a terrorist state because of alleged links between security officials and militant groups.

"Let me tell you categorically, these were not mujaheddin militia. This was the regular army. The evidence is very clear," a senior Indian military intelligence officer said. As evidence, he displayed captured Pakistani army pay books, letters from soldiers' loved ones written in Pakistani Urdu, and a soldier's diary with a picture of a Pakistani cricket player.

Pakistan's military chief of staff, Gen. Parvez Musharraf, told the BBC today that his troops had crossed the Line of Control on reconnaissance missions. But, as with similar admissions by Pakistani officers in recent weeks, he did not say whether regular troops had occupied permanent positions in Indian territory or had engaged in combat.

Whoever the fighters are, the surprisingly swift denouement of the conflict suggests that Pakistan wields near total control over them. After Sharif formally requested that they withdraw from their positions in the heights around Kargil -- while continuing to insist he could not force them to do so -- armed Islamic groups accused him of betrayal and vowed to soldier on. But the fighters began withdrawing almost immediately.

Special correspondent Rama Lakshmi in New Delhi contributed to this report.

CAPTION: Indian soldiers pose with their flag hoisted on top of Gun Hill, which was recently recaptured from Islamic rebels.