Monday's attack in Lal Chowk of Srinagar, the city's busiest commercial area, provoked heavy retaliation from Indian security forces, forcing hundreds of people to run and take shelter inside buildings as shopkeepers shuttered their stores, witnesses said.
The gunfight went on for more than an hour before subsiding, leaving scores of people trapped in buildings, shops and hotels.
The fighters first hurled a grenade at the compound of the Central Reserve Police Force (CRPF), then fired at its soldiers at the gate, according to a spokesman for the CRPF, which recently replaced India's main paramilitary wing, the Border Security Force, in combating the separatist revolt.
He added that two civilians and two CRPF soldiers were killed and six civilians were injured, including a Japanese man who was not identified.
But Press Trust of India news agency said the Japanese victim was a journalist while a CRPF spokesman, AK Singh, said a CRPF officer and two policemen were among those injured.
Exchange of fire
The fighters took cover in nearby buildings and continued firing at CRPF personnel who returned fire, causing the busy commercial area to be deserted, said the witnesses on condition of anonymity.
A man who identified himself as Abu Usama and claiming to be a spokesman for the Al-Mansoorain separatist group called a local news agency to say four of the group's fighters carried out the attack and escaped.
Monday's attack came after the
arrest of a Delhi blast suspect
This could not be independently confirmed.
Armed groups have been fighting Indian security forces in the Himalayan region of Kashmir, the only Muslim majority state in predominantly Hindu India, since 1989.
The violence 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 merger with Pakistan.
Monday's attack came a day after Delhi police conducted raids at several places in Srinagar and made fresh arrests in connection with the 29 October serial blasts in the Indian capital that killed 60 people and wounded more than 200.
The raids followed the arrest on Thursday of Tariq Ahmed Dar, a sales epresentative with a multinational pharmaceutical company, who is accused of being the Delhi bombings' chief conspirator and financier.
Tariq was driving home from southern town of Anantnag when detectives from Delhi police intercepted his car in Srinagar and arrested him. He was quickly airlifted to the Indian capital for interrogation.
Delhi Police Commissioner KK Paul said on Sunday the Delhi blast case had been solved with the arrest of Tariq, adding that he was a key member of the Pakistan-based Lashkar-e-Tayyaba group.
"The state police had no knowledge about the arrest"
Inspector-General of Police,
He said it was clear from the investigations and Tariq's interrogation that Lashkar-e-Tayyaba was behind the near-simultaneous bombings in three crowded marketplaces before two major festivals, Diwali and Eid al-Fitr, when thousands of people were doing last-minute shopping.
Paul said Dar's bank account showed a deposit of Rs500,000 ($10,900) from abroad a few days after the bombings. He is alleged to have been in New Delhi between 4 and 6 October to scout for locations where the bombs were to be planted.
In the dark
Kashmir police officials said the Delhi police, before arresting Tariq, did not take them into confidence. "The state police had no knowledge about the arrest," Inspector-General of Police (Kashmir Range) Javed Makhdoomi said.
But on Monday local policemen and CRPF personnel were assisting a team from Delhi police's special cell investigating the serial blasts, in conducting raids at specific places in downtown Srinagar localities.
At least one person, identified as Muhammad Hanief, was arrested from Kawadara, one of the localities deep inside the congested old part of Srinagar. At least two others were picked up from other locations for questioning, sources in the local police said.
The 29 October triple bombings
left 60 people dead in New Delhi
Delhi police chief Paul has said at least seven other people are thought to have been involved in the conspiracy, four of whom have been identified by name.
Tariq's wife Surraya has, meanwhile, dismissed the accusations against her husband as "baseless" and "concocted".
She said it was not true that her husband had visited the Indian capital prior to the blasts. "Tariq was very much in Srinagar during the period and Delhi police should check the details of the calls he made from his cellphone to verify it," she said.
According to her father, Abdul Majeed Butt, Tariq along with his friend was returning from Anantnag in a car when they were seized by Delhi police detectives.
He has been falsely implicated because the Indian investigating agencies were embarrassed by the fact that the man they had arrested earlier claiming him to be involved in the serial blasts, had turned out to be a petty thief, Butt said.
"Tarriq was very much in Srinagar during the period and Delhi police should check the details of the calls he made from his cellphone to verify it"
wife of Delhi blast accused Tariq Ahmed Dar
Butt was referring to the arrest last week of another Kashmiri, Ghulam Mohiuddin Lone, who was reported to be in possession of Rs20,000.
The money, Indian counter-insurgency force Rashtriya Rifles claimed, had been received by Lone from Lashkar-e-Tayyaba in exchange for carrying out the blasts.
But during the investigations by the local police, it was revealed that the money had been stolen from a truck operator Lone had briefly worked for.
Aljazeera.net's Yusuf Jameel in Srinagar contributed to this report