It was the deadliest attack on civilians in two decades in the disputed territory. Both India and Pakistan claim the Kashmir region and have fought two wars over it. Troops from both sides have traded intermittent small-arms fire across the border for the past few days.

The path for Indian rupee and government bonds this week hinges on the geopolitical fallout from the militant attack in Kashmir, traders said.

A day after the U.N. appealed for restraint following Tuesday's deadly attack in Indian-administered Kashmir, India reported an exchange of fire across the de facto border in the disputed region.