Indian Prime Minister Narendra Modi had been under intense pressure to find a way to retaliate for the deaths of 19 soldiers in a September 18 attack on an army base in Kashmir.
Indian sources said Thursday that commandos had carried out "surgical strikes" several kilometres (miles) inside Pakistan-controlled Kashmir on what they called "terrorist" targets. New Delhi blamed the attack on militants belonging to the outlawed group Jaish-e-Mohammed, which has its headquarters in Pakistan.
It said the Indian military had resorted to unprovoked firing on the LoC, leading to the death of two Pakistani soldiers.
Sri Lanka said on Friday that peace and security were vital for regional cooperation, but stopped short of pulling out.
"People living in border areas know things by experience", he said.
However, the people feel it hard to leave their homes.
"But we live in fear that they're going to have a coup, that jihadists are going to take over the government, they're going to access to nuclear weapons, and you'll have suicide nuclear bombers. We are really distressed".
Following a high level cabinet meeting on Friday, Pakistan's Prime Minister Nawaz Sharif had stern words over Kashmir that highlighted how deeply the historical animosity between Pakistan and India runs. In a thread titled "Indian Aggression - Pakistan's Revenge", Saeed claimed that no surgical strikes took place in Pakistan-occupied-Kashmir and alleged that it was a "psychological-operation drama" played out by National Security Advisor Ajit Doval.
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Pakistan's Foreign Ministry said India's claims to have carried out surgical strikes were "baseless" and accusing India of "deliberately" escalating tensions.
Jammu and Kashmir is India's only Muslim-majority state and rebel groups there have for decades fought for independence from India, or a merger with Pakistan.
Indian prime minister Narendra Modi raised hopes of a new era in relations with Islamabad when he paid a surprise Christmas Day visit to Mr Sharif in December. Indian-made Bollywood films are wildly popular in both countries.
The move came days after Mr Modi warned Pakistan that India would push to make it a pariah state, accusing it of "exporting terrorism in all corners".
Islamabad says India's stance is a "blatant attempt" to deflect attention from human rights abuses in the region.
Disputed Kashmir has been a flashpoint for decades and has sparked two wars.
Indian Home Minister Rajnath Singh denied the allegation and said, Chandu Chohan, (22) an Indian soldier now said to be in Pakistani custody, strayed into PoK "inadvertently" and he was captured much after the Indian army returned after the strikes.
Lt General Ranbir Singh, Director General of Indian Military Operations (DGMO), told reporters in New Delhi: "The operations were focused on ensuring that these terrorists do not succeed in their design to cause destruction and endanger the lives of our citizens". Pakistani officials did not comment.