India searches for militants in Kashmir, as tensions soar with Pakistan

Armed police and soldiers searched homes and forests for militants in Indian Kashmir on Friday and India's army chief visited the area to review security, after the killing of 26 men earlier this week - the worst attack on civilians in nearly two decades.

The militant attack triggered outrage and grief in India, along with calls for action against neighbour Pakistan, whom New Delhi accuses of funding and encouraging terrorism in Kashmir, a region both nations claim and have fought two wars over.

India's army chief visited Srinagar, the capital of Indian Kashmir, and authorities scoured Pahalgam, the scenic town where the militant attack took place on Tuesday.

India has said there were Pakistani elements in Tuesday's attack, when militants shot 26 men in a meadow in the Pahalgam area. Islamabad has denied any involvement.

Indian financial markets plummeted earlier in the day but recovered some of their losses by the close of trade. The key stock indexes ended lower by 0.7%-0.9%, while the Indian rupee ended 0.2% down, while the 10-year benchmark bond yield rose four basis points.

The nuclear-armed nations have unleashed a raft of measures against each other, with India keeping a critical river water-sharing treaty in abeyance and Pakistan closing its airspace to Indian airlines, among other steps.

General Upendra Dwivedi visited Kashmir on Friday to review security arrangements a day after Prime Minister Narendra Modi vowed to chase the perpetrators to "the ends of the earth".

India's chief opposition leader Rahul Gandhi also visited Srinagar on Friday, meeting the injured and local government heads.

India's top two carriers IndiGo and Air India said some of their international routes, including to the United States and Europe, would be affected by the closure of Pakistani airspace, leading to extended flight times and diversions.

There have been calls for and fears that India could conduct a military strike in Pakistani territory as it did in 2019 in retaliation for a suicide bombing in Indian-controlled Kashmir that killed at least 40 Indian paramilitary police .

Several leaders of Modi's Hindu nationalist Bharatiya Janata Party have called for military action against Pakistan.

The two countries both claim Muslim-majority Kashmir in full, but rule it in part. India, a Hindu majority nation, has long accused Islamic Pakistan of aiding separatists who have battled security forces in its part of the territory - accusations Islamabad denies.

Indian officials say Tuesday's attack had "cross-border linkages". Kashmiri police, in notices identifying three people "involved" in the violence, said two of them were Pakistani nationals. India has not elaborated on the links or shared proof.

Those killed in the attack came from all over India, Modi has said. Television channels showed funerals of victims taking place in several states and newspapers carried photos of women grieving and people praying in front of funeral pyres.

Early on Friday, authorities in Indian Kashmir demolished the houses of two suspected militants, one of whom is a suspect in Tuesday's attack, an official said.

Governments in many states ruled by Modi's Hindu nationalist Bharatiya Janata Party have torn down what they say are illegal houses or shops of people accused of crimes, many of them Muslims, in what has come to be popularly known as "instant, bulldozer justice".

In an unrelated incident, sporadic firing was reported along the Line of Control that divides Indian and Pakistani Kashmir, the Indian army said on Friday, despite a 2021 ceasefire which has been violated several times.