Two of the fighters who on Wednesday attacked Leeward Hotel - located on an island in the Valley's famed Dal Lake - were killed by retaliatory fire from members of India's Central Reserve Police Force (CRPF).
Al-Mansoorin, one of the many armed separatist groups battling Indian rule in disputed Kashmir, admitted responsibility for the attack, adding that a third "mujahid" returned to its hideout "safe".
The group threatened to carry out more such attacks in coming days.
The incident occurred just weeks before Indian security forces in the Valley were due to vacate various hotels and other buildings in the Dal Lake area that they had requisitioned over the last 15 years to house regiments on counterinsurgency assignment in the valley.
The plan to relocate government forces is aimed at making the hotels and guesthouses available once again to their owners at a time of surging tourist arrivals – both from abroad and other parts of India – after a long period when violence kept visitors away from Kashmir.
A senior police officer said the CRPF men were apparently taken unawares as they were watching a cricket match on TV.
By the time they could retaliate, the attackers had already entered the building after overpowering a five-man sentry. Two of the guards are battling for their lives at a military hospital in the Kashmiri capital, officials said.
Recent clashes have taken a high
toll on civilians and policemen
Residents said the gun battle between the attackers and the policemen raged for several hours, causing extensive damage to the hotel. The incident sparked fear and panic among the hundreds of Indian tourists staying in other hotels and guesthouses.
Officials of the Kashmir government said they feared the incident would scare away tourists – mostly from other states of India – who currently are vacationing, or planning to do so, in the valley to escape the plains' scorching summer.
The Dal Lake assault also coincides with the start of an annual Hindu pilgrimage which brings thousands of visitors from different parts of India. The Amarnath Yatra, as it is known, will conclude by August end after the pilgrims have completed their trek to a shrine located 12,799 feet high in the Kashmir Himalayas.
In other incidents, one separatist fighter was killed and an Indian soldier was wounded in a firefight between rebels and paramilitary forces at Gopal Pora on the outskirts of Srinagar on Wednesday afternoon.
Earlier, a total of four fighters were killed in clashes with Indian troops at Handwara in the frontier Kupwara district and at Malhan in the district of Poonch, close to the Line of Control, the de facto border that splits the disputed region between India and Pakistan.
There have been almost daily
border skirmishes of late
Indian troops said they shot dead a rebel in the southern Pulwara district while in Poonch's Sargand village, unidentified assailants shot dead Muhammad Sher Khan, whose two brothers are policemen.
Government officials said a Muslim woman was shot and wounded in Kulgam area of the southern Anantnag district.
More than 40,000 people are thought have died in Kashmir in clashes between separatist guerrillas and Indian security forces since 1989. Local human-rights and political groups say the figure is much higher.