NEW DELHI, AUG. 21 -- Indian Prime Minister V.P. Singh sought today to play down fears of escalating military tensions with Pakistan as an artillery duel between Indian and Pakistani forces across the disputed Kashmiri border entered its second day.

Singh told Parliament that Indian and Pakistani units were continuing to exchange heavy artillery fire in an area of Kashmir where previous skirmishes between opposing border troops had involved only light weapons. But Singh said that commanders on both sides were talking on a special hot line and that he hoped the conflict would be over soon.

"There should be no complacency or undue alarm over these incidents. We should neither multiply it nor minimize it," Singh said, adding that India's attitude toward the matter was "subdued but firm."

Indian officials reported Monday that Pakistan had initiated artillery shelling in the Machhal sector of the U.N.-supervised Kashmiri ceasefire line, which has been the de facto international border since 1971. Pakistani officials denied shelling the area, saying the only artillery fire along the border came from the Indian side a week ago.

{Military officials in Jammu, the winter capital of Indian-held Kashmir, said tanks and troop reinforcements had been dispatched to the border area, the Associated Press reported.}

The lobbing of shells and words represents a modest increase in tensions along a border where India and Pakistan have fought three wars in four decades.

The incidents have occurred against a backdrop of political instability in Pakistan and unrest in the Indian state of Kashmir, where the Moslem majority population has mounted a separatist uprising against India's Hindu-dominated government.

Border skirmishes involving exchanges of light-arms fire have been common in Kashmir for years. And in the northern Siachen Glacier region, Indian and Pakistani forces have routinely exchanged artillery fire with minimal casualties. But the shelling reported this week has taken place in areas where artillery had previously not been employed.

Recent military tensions in Kashmir reached a peak late last spring when Indian and Pakistani forces went on alert and moved armor, aircraft and troops closer to the border following several months of charges and countercharges over Kashmir's political status.

India claims sovereignty in the region, while Pakistan urges that Kashmiris be allowed to decide their future in a plebiscite.

Public feuding between the two countries quieted this summer following diplomatic intervention by the United States and the Soviet Union to head off hostilities. Despite preliminary bilateral talks, the rival armies remain deployed in a tense face-off with no sign of imminent disengagement.

Meanwhile, violence has continued in Indian Kashmir, where casualties from clashes between separatists and security forces have reached an average of about 100 a week.

The Indian Parliament approved presidential rule in Kashmir and gave the armed forces special powers in the riot-torn state, All India Radio reported.

A Western diplomat here said that despite the escalating death toll, there are signs that the Indian government may be regaining control of the situation in the Kashmir Valley after months of growing turmoil and ineffective crackdowns by security forces.

Some Indian officials have expressed concern that the recent dismissal of Pakistani prime minister Benazir Bhutto, in a move apparently backed by the armed forces, would lead to an escalation of tensions over Kashmir.

While Pakistan's new prime minister has said there will be no shift in the publicly stated policy of not providing direct military support to Kashmiri separatists, elements of the Pakistani military reportedly are anxious to send covert aid to Moslem guerrillas operating in Indian territory.

In a move likely to fuel Indian fears about increased covert activity along the border, Pakistan's interim government announced it was replacing the chief of the country's influential Inter-Services Intelligence agency, or ISI, with a former aide to the late general Zia ul-Haq, a staunch Islamic conservative who backed fundamentalist rebels in Afghanistan and Kashmir.