So I tried reading some more & here I am with obviously biased & incomplete answer (Indian & No expertise). Overtime, I will try to include as much details as possible.
Location of Kashmir is the most important factor
Source1 Himalayan peaks & rivers are the most important water resources for both India & Pakistan. Population density is very high in both countries, both are developing nations so need for resources (both water & electricity) is very high. Total control on resources of Kashmir will provide either country a significant boost in resources.
Source2 Kashmir provides land connectivity between India & Afghanistan as well as Pakistan & China. Both countries want to get the advantage of respective connectivity as well as does not want to provide the opportunity for other country.
Sentiments/ Religion/ Historical conflicts/ Population Moral ... Will be done later.