Shah arrived in the evening and was received at the airport by Lieutenant Governor Manoj Sinha and Union minister Jitendra Singh, among others.
Indian troops guarding the border, retaliated resulting in exchanges.
The blast took place in a bar in the main market area of Rajouri town.
This is the 23rd incident of ceasefire violation in June.
Heavy security arrangements have been put in place, ahead of the twin public rallies of Prime Minister Narendra Modi to be held on Saturday in Kathua and Rajouri districts.
Heavy rains lashed parts of Jammu and Kashmir on Wednesday, triggering flash floods and landslides that blocked the strategic Jammu-Srinagar national highway with hundreds of vehicles stranded, and prompted authorities to shut schools in Doda, Kishtwar and Ramban districts.
Fourteen people were detained for questioning, officials said, adding that some of them have been let off.
BJP has warned the government not to accept unreasonable demands of Mufti as it would endanger the security of the country.
All educational institutes across the state are closed for the second consecutive day, the officials said.
In a major embarrassment to the Indian Army, the national flag was held upside down at a function in presence of senior army officers in Rajouri district of Jammu and Kashmir.
With infiltration showing upward curve, the Jammu and Kashmir police has identified 21 major infiltration routes of militants along Indo-Pak border in the state. "We have surveyed and identified 21 major infiltration routes along Indo-Pak border...This will help security agencies to pin down infiltrating militants...," a senior police officer told PTI.
Meanwhile, one foreign militant divisional commander of Al Badar outfit, identified as Abu Ishtaq, was killed in an encounter with security forces at Kotli Kala Ban in Manjakote area of district Rajouri.
Rifleman Vinod Singh and Rifleman Jaki Sharma were grievously injured in the firing and later succumbed to their injuries, the spokesman said.
The militants took away their weapons and set fire to the house of Tufel, who is a deputy headman in the area.
The militant, identified as Abdul Rehman, was killed in an encounter at Manyal in Rajouri district last night.
The Pakistan army used heavy weaponry, firing 120 mm mortars targeting civilian hamlets and forward posts since 5.30 pm on Tuesday, said an army officer.
In a statement, the ministry of home affairs said the UT of Ladakh consists of two districts of Kargil and Leh while the rest of the erstwhile state of Jammu and Kashmir is in the UT of Jammu and Kashmir.
Out of the 280 constituencies in Jammu and Kashmir, 43 are going to polls in the second phase with 25 in Kashmir and 18 in Jammu division.
Zulfikar (12) stepped on a landmine near the Line of Control in Laam area of the district on Tuesday, when he was taking cattle back home, they said adding, he died on the spot.
The announcement by India and Pakistan to strictly observe all agreements on ceasefire along the Line of Control (LoC) and other sectors has rekindled hope for a peaceful future among border residents in Jammu and Kashmir who have been living under constant fear of firing and shelling.
The border skirmishes witnessed a spurt after India's air strike.
'If the jihadi infiltration attempts are assisted by the Pakistan army, the Indian Army will retaliate strongly.'
Four more Lashkar-e-Tayiba militants and an army trooper were killed in yet another fierce gunfight in the hilly Rajouri district of Jammu region on Friday.
Nineteen candidates saw an extremely close contest in the maiden District Development Council (DDC) polls in Jammu and Kashmir where the margin of victory was less than 100.
During a gunfight between militants and police in Neela-Doke area in the district, a civilian was critically injured, they said, adding he succumbed to his injuries at a hospital. The victim has been identified as Mohmmad Lateef, a resident of Kandi.
Two security personnel and a militant were killed when the Army foiled an exfiltration bid along the India-Pakistan border in Rajouri district.On observing the movement of militants towards the LoC, the security personnel fired at the exfiltrators in Ek Nallah area. Two jawans and a militant were killed in the ensuing gun battle.However, the other ultras managed to escape.
Militants also abducted four people.
The IED was planted near Khadi Gala area in the district on Wednesday night to target security forces. However, the explosion missed a security forces vehicle.\n\n
The chief minister assured all possible measures to protect the life and property of the people, adding that security would be strengthened wherever required and army deployment would take place again wherever needed.
The infant, his mother Fatima Jan, 35 and another civilian Mohammad Arif were injured when mortar shells fired by Pakistan hit their village in Shahpur sector late on Sunday.
According to the sources, they told troops that they had surrendered because they were fed up with the militancy and added that most militants in PoK also wanted to do likewise.
Yasin, who had joined the outfit after deserting police as special police officer (SPO), was involved in the killing of ten minority community members at Dhar Sakri and six at Gabbar Budhal.
The army foiled an infiltration bid shooting dead a militant in an encounter along the Line of Control in Rajouri district on Thursday.
An AK rifle along with four magazines and a mobile phone were recovered from the slain militant.
The J-K top cops also said less than 200 militants are currently active in Jammu and Kashmir.
"The army chief chief reviewed the security situation in Jammu and Kashmir and also operational preparedness of Northern Command at a high-level meeting," officials said.
Militancy has plagued the valley since more than two decades and most of the time innocent civilians and children are the victims
Members of two communities clashed after India's victory over Pakistan in the Twenty20 World Cup on Monday night, leaving 23 people injured in Rajouri border town and forcing authorities to impose prohibitory orders in the area.
The poll process for the second tier of the Panchayati Raj system will be completed by November 5, he said.
