The correct option is A Are watching
The sentence begins with an exclamation "Look!" which means the action is being performed right now and the speaker is giving the listener a command to look at that action. Hence the sentence is in present continuous tense. Option C is correct, because "are watching" is in present continuous tense and describes that Neha and Kanika are performing the action of "watching a film" while the speaker speaks. Option A is incorrect because 'watch' is in simple present tense, whereas the sentence is in the continuous form. Option B is incorrect because "is" in "is watching" refers to only one person, whereas the speaker mentions two people, Neha and Kanika. Option D is incorrect because "watched" is in the simple past tense, whereas the sentence is in present continuous.