Troops from Pakistan and India exchanged fire in disputed Kashmir for a third night in a row, officials said Sunday, as relations between the nuclear-armed rivals plunged to their lowest level in years.

India has accused Pakistan of supporting "cross-border terrorism" after gunmen killed 26 people in the worst attack on civilians in contested Muslim-majority Kashmir for a quarter of a century.

Islamabad has denied any involvement, calling attempts to link Pakistan to the attack "frivolous" and vowing to respond to any Indian action.

The Indian military on Sunday held naval drills - releasing images of warships firing missiles - while the country's security forces pressed on with their hunt for those behind the April 22 attack at a tourist hotspot in Pahalgam.

The military blamed Pakistan for the "unprovoked" firing of small arms along Kashmir's Line of Control that separates the two countries. 

"(Our) own troops responded effectively with appropriate small arms fire," it said of the latest incident, which has not been reported by Pakistan.

Indian police have issued wanted posters for three men -- two Pakistanis and an Indian -- who they say are members of the Pakistan-based Lashkar-e-Taiba group, a UN-designated terrorist organisation.

India's federal home ministry has handed over the attack probe to the National Investigation Agency, which focuses on counter-terrorism.

"The eyewitnesses are being questioned in minute detail to piece together the sequence of events that led to one of the worst terror attacks in Kashmir," an agency statement said Sunday.

Pakistan's Prime Minister Shehbaz Sharif on Saturday said the country was "open to participating in any neutral, transparent and credible investigation" into the attack.

Indian naval exercises

India's navy meanwhile said it carried out exercises to "revalidate and demonstrate readiness of platforms, systems and crew for long range precision offensive strike", without detailing where the drills took place.

The Indian Express newspaper on Sunday quoted a top government source as saying "there will be military retaliation" and officials "are discussing the nature of the strike".

Kashmir has been divided between India and Pakistan since their independence in 1947. Both claim the territory in full but govern separate portions of it.

Rebel groups have waged an insurgency in Indian-controlled Kashmir since 1989, demanding independence or a merger with Pakistan.

India's Hindu nationalist Prime Minister Narendra Modi on Sunday reiterated his pledge that the Pahalgam victims "will get justice". 

"Terrorists and their patrons want Kashmir to be destroyed again, that is why such a big conspiracy was hatched," he said in his monthly radio address to the nation.

On Saturday, soldiers in Indian-administered Kashmir bombed the family home of one of the Pahalgam suspects.

The house of Farooq Ahmad Tadwa was destroyed by authorities in Kupwara district, one of a series of demolitions targeting houses of alleged militants.

So far nine houses belonging to militants have been bombed since the Pahalgam attack, a police official told AFP on Sunday on condition of anonymity.

In the aftermath of the attack, New Delhi suspended a water-sharing treaty, announced the closure of the main land border crossing with Pakistan, downgraded diplomatic ties, and withdrew visas for Pakistanis.

In response, Islamabad has ordered the expulsion of Indian diplomats and military advisers, cancelling visas for Indian nationals - with the exception of Sikh pilgrims - and closing the main border crossing from its side.

The United Nations has urged the arch-rivals to show "maximum restraint" so that issues can be "resolved peacefully through meaningful mutual engagement".

Pahalgam marks a dramatic shift in recent Kashmiri rebel attacks, which typically target Indian security forces.

In 2019, a suicide attack killed 41 Indian troops in Kashmir and triggered Indian air strikes inside Pakistan, bringing the countries to the brink of all-out war. The New Arab