The correct option is D Watching
The sentence in question is: 'As she stood ______ them'. The verb here is 'stood'.
Verbs that describe a movement or a position are often followed by present participles. For example, 'He went cycling.'
A present participle is a form of a verb + ing. It generally functions as an adjective.
Option D: 'Watching' is a present participle that describes an action while Alice 'stood'. It's the most suitable option for the reason stated earlier. Hence option D is correct.
Option A: 'Watch' refers to the simple present tense in first person. E.g. I watch a movie every weekend.
The narrative is in the third person: 'Alice' or 'she'. Hence this word isn't suitable here.
Option B: 'Was watching' is a verb phrase. It is used to describe the main action performed by the subject. But, the subject 'Alice' is already performing an action 'stood'. It does not need another verb phrase added to it.
Also, 'stood' is in the simple past tense whereas 'was watching' is in the past continuous. They cannot be followed one after another.
Option C: 'Watched' is a simple past verb and refers to a past action. But there is a main verb already present, 'stood'. It requires no other verb to be added.
Hence options A, B and C are incorrect.