India's army chief will review security arrangements on Friday and visit the site of a deadly attack on tourists in Indian Kashmir earlier this week, with fears of fresh tensions with long-time rival and neighbour Pakistan spooking markets.

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

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, India's army chief, will visit Kashmir on Friday to review security arrangements and was likely to visit the site of the attack, an army source said, a day after Prime Minister Narendra Modi vowed to chase the perpetrators to "the ends of the earth".

Indian stock markets fell on Friday and the key indices were down by around 1%, while the rupee turned lower and the 10-year benchmark bond yield jumped 4 basis points.

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 belonged all parts of India, Modi said in a speech on Wednesday, even as television channels showed images of funerals taking places in several states across the country.

Pictures of women wailing and people praying in front of burning pyres as many of the 26 dead were cremated were splashed across most national dailies on Friday.

Early on Friday, authorities in Indian Kashmir demolished the houses of two suspected militants, one of whom is an accused 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.