Indian troops in Kashmir shot dead 38 Muslim separatists and exchanged fire with Pakistani troops yesterday, as the two countries' leaders held peace talks in Agra.
Troops identified all the dead as separatists but have not ascertained to which groups they belonged, the sources added.
In Islamabad, a pro-Pakistan guerrilla group said it had killed 11 Indian troops in two ambushes in Kashmir yesterday.
It was the first artillery duel this year between the nuclear rivals' armies across Kashmir's line of control that divides the disputed state between the two countries.
Meanwhile, the Indian Prime Minister, Mr Atal Behari Vajpayee, and President Pervez Musharraf were meeting in Agra. The two leaders opened talks in the historic city, overlooked by the Taj Mahal, to end over half a century of hostility that saw three wars.
A ring of steel has been thrown around Agra, 140 miles east of Delhi, for the two-day summit. Sharpshooters were deployed on buildings surrounding the plush Jaypee Palace Hotel where the leaders met. This is the first summit between the two countries since they fought an 11-week border war in Kashmir's mountainous Kargil region in which 1,200 combatants died.
"The talks between Vajpayee and Gen Musharraf were held in a cordial, frank and constructive manner," an official spokeswoman said. But she declined to elaborate on what the two men spoke about during their 90minute longer than expected meeting.
Gen Musharraf was struck with wonder when he paid a visit to the Taj Mahal, India's famed monument to love. "Magnificent, fantastic, a wonder of the world," he said.
Simultaneous meetings also took place between the two delegations. Mr Vajpayee has accepted Gen Musharraf's invitation to visit Pakistan later this year.
India's Information and Broadcasting Minister, Mr Sushma Swaraj, said the two leaders discussed Kashmir, cross-border terrorism , reducing nuclear accidents, trade relations and prisoners of war, but declined to elaborate.
India claims Pakistan holds 54 prisoners since the 1971 war, which led to the creation of Bangladesh. Islamabad denies the allegation.
Officials said a joint declaration is likely to emerge today. "The timetable [for the talks] has been left deliberately open-ended to allow the two sides to set their own pace," a senior Indian official said.
Diplomats from both countries said the summit would focus on war-torn Kashmir, which Pakistan has declared the "core issue" of the peace talks. India accuses Pakistan, which occupies a third of Kashmir and claims the rest, of fuelling the state's 12-year old insurgency that has claimed over 30,000 lives. Pakistan says it provides Kashmiri insurgents only with diplomatic and moral support.
"The legacy of the past is not a happy one," Gen Musharraf told guests at the president's banquet in New Delhi. "Blood has been spilt; precious lives have been lost. We owe it to our future generations to do our utmost to open a new chapter of goodwill and co-operation."
Despite heavy security in Agra, scores of Indians staged a protest in the city demanding an apology from Gen Musharraf, then chief of the Pakistani army, for masterminding Kashmir's summer war in 1999.
Gen Musharraf seized power from an elected government in a bloodless coup soon after.
Police also arrested about 400 activists from the extremist Hindu Shiv Sena party, that is part of Mr Vajpayee's ruling coalition, who were protesting against talks with Pakistan unless it stopped meddling in Kashmir. - (Additional reporting AFP, Reuters)
Gen Musharraf and Mr Vajpayee later agreed to reduce nuclear tensions, as their first ever summit headed towards an unexpectedly warm and chummy denouement. Sources indicated the leaders had agreed to exchange details of their nuclear facilities and "command structures" within three months. Both sides also agreed to continue their new dialogue.