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.

In the days since, tensions have risen dangerously between India and Pakistan, which have fought two of their three wars over Kashmir.