Relations between India and Pakistan are cratering following a deadly attack in the disputed Himalayan region of Jammu and Kashmir that left more than two dozen tourists dead, raising fears of military escalation between the nuclear-armed rivals.

India accused Islamabad of supporting "cross-border terrorism." Pakistan has denied the accusation and a previously unknown militant group calling itself Kashmir Resistance has claimed responsibility for the attack.

India's foreign exchange and interest rate traders have turned cautious on fears of a possible escalation in tensions between New Delhi and Islamabad following a deadly militant attack in India's Kashmir region.