The decision torpedoed the February 6-7 event which Gyanendra had planned to attend. The charter of the South Asian Association for Regional Co-operation states leaders of all seven nations must attend summits.
India had voiced "grave concern" at the king's dismissal of the coalition government and imposition of emergency rule, calling it "a serious setback to the cause of democracy in Nepal."
Gyanendra said he fired the government of Prime Minister Sher Bahadur Deuba for failing to hold elections or to bring peace to a country racked by an increasingly deadly Maoist revolt. The monarch, vaulted to the throne four years ago by a palace massacre that wiped out most of the royal family, pledged to "restore democracy and law and order in the country in the next three years."
In Kathmandu security was tight on streets that were jammed as usual while shops, businesses and schools were open. But landlines and mobile phone networks and Internet links were still not working after being shut down Tuesday. The international airport was functioning.
Gyanendra's new 10-member new cabinet, mainly made up of pro-monarchists including Foreign Minister Ramesh Nath Pandey and Finance Minister Madhukar Shumsher Rana, was sworn in at the palace.
Gyanendra said the sacking of the coalition was necessary to crush a nine-year revolt in the scenic mountain kingdom that has claimed over 11,000 lives.
Maoist guerrilla leader Prachanda, meanwhile, urged "pro-people forces of the world" to oppose Gyanendra's power grab, denouncing him as a "national betrayer."
Prachanda said the Maoists, fighting to topple the monarchy and install a communist republic, were prepared to cooperate with other political forces by establishing "a broad front with all that are against feudal autocracy." Political parties said security forces had detained political activists, trade union officials, students and their leaders but the full number was not known.