Pakistan on Friday strongly rejected allegations by India that it had links with militants, who carried out a deadly bomb attack in India-administered Kashmir - the worst in the area in almost two decades - that killed at least 42 soldiers.

"We strongly reject any insinuation by elements in the Indian government and media circles that seek to link the attack to the state of Pakistan without investigations," Pakistan's foreign ministry said in a statement issued around midnight.

Pakistani authorities described the attack as "a matter of grave concern" and said it has always condemned violence in Kashmir, a region divided between the two countries since the subcontinent's partition and independence from British rule in 1947 and over which both have waged two wars and several minor conflicts.

The attack took place on Thursday evening, around 20 kilometers (12 miles) from the regional capital, Srinagar, when a suicide attacker detonated near a convoy of several buses of the Central Reserve Police Force.

The Indian police has confirmed at least 42 deaths, but are yet to confirm the exact number of people who were wounded in the attack.

The attack was claimed by the Jaish-e-Mohammad militant outfit, in a statement sent to local agency Global News Service.

After the attack, the Indian foreign ministry said the attack had been carried out by "Jaish-e-Mohammed, a Pakistan-based and supported terrorist organisation proscribed by the United Nations and other countries."

"This terror group is led by international terrorist Masood Azhar, who has been given full freedom by the Government of Pakistan to operate and expand his terror infrastructure in territories under the control of Pakistan and to carry out attacks in India and elsewhere with impunity," the statement had said.

It also urged Pakistan to "stop supporting terrorists and terror groups operating from their territory."

India has repeatedly accused Pakistan of supporting "cross-border terrorism" in Indian Kashmir and of sheltering terrorist groups to operate on its territory and plan attacks against Indian targets.

Following the attack, India also withdrew the Most Favored Nation status, which it had granted to Pakistan in 1996 under World Trade Organization rules.