Among the injured in the late Tuesday attack was Jammy & Kashmir state's former housing and tourism minister, Gulam Hassan Mir, who had just delivered a speech at the rally, held in his hometown Tangmarg, close to the ski resort of Gulmarg, outside Srinagar, the summer capital of Indian Kashmir.
Police and hospital sources said the condition of about a dozen wounded people was serious. "They are battling for life," said Dr Muzaffar Ahmed at Srinagar's government-run SMHS hospital.
A large crowd comprising mainly relatives and neighbours of the blast victims gathered outside the hospital, praying for their recovery.
An obscure outfit Al-Nasirin has claimed responsibility for carrying out the attack but gave no reasons.
Earlier on Tuesday, Indian soldiers captured a separatist fighter trying to escape from a hotel in Srinagar after an attack on a police compound that left two civilians and two soldiers dead.
Security forces on Tuesday sealed off roads leading to the four-storey Peak View Hotel in central Srinagar, where a group of separatists had holed up since Monday afternoon, exchanging gunfire with security forces through the night.
A woundedIndian soldier gets
help during the Srinagar gunfight
An undetermined number of fighters had taken refuge there after attacking a compound of the Central Reserve Police Force in Lal Chowk, a business district in Srinagar.
Two civilians and two soldiers were killed in the attack.
Six others were injured, including a Japanese freelance photographer, Takeshi Sakuragi, 27.
On Tuesday, one fighter tried to escape from the hotel by jumping from a window, but security forces captured him, said Deputy Inspector General SR Ahuja, who led the operation.
"We have captured a militant in an injured state. He is severely injured and may not survive," Ahuja said, adding that he was armed with a grenade and an AK-47 rifle.
Later in the day, J&K police chief Gopal Sharma said the police had captured for the first time ever a fidayeen (suicide attacker) from a back street while he was trying to flee from the area.
Identified as Pakistani national Aijaz Ahmed Butt, he was reportedly in possession of one AK-47 assault rifle with five magazines and three hand grenades besides a fruit juice can with a Pakistani manufacturer's label.
Sharma said Aijaz alias Abu Samana hailed from Faisalabad town and was associated with the Lashkar-e-Tayyaba group. He had crossed Line of Control, the de facto border that splits Kashmir into Indian- and Pakistani-controlled parts, after the 8 October 8 earthquake.
Monday's attack on the police compound provoked heavy retaliatory gunfire from security forces, forcing hundreds of people to run and take shelter inside buildings to escape the crossfire. All were evacuated safely later.
Scores were injured in Tuesday's
bomb attack on a political rally
The Al-Mansoorain group said it carried out the attack on the police compound.
It is one of many groups that have been fighting Indian security forces in the Himalayan region of Kashmir since 1989.
The violence in Kashmir, the only Muslim-majority state in predominantly Hindu India, has left more than 60,000 people dead.
Kashmir has been divided since 1948 between India and Pakistan, and separatist groups want either independence or a merger with Pakistan.