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One policeman was killed and six civilians were injured when a group of heavily armed fidayeen (suicide bombers) attacked a paramilitary Central Reserve Police Force camp located in Lal Chowk, at the heart of Srinagar, on Wednesday afternoon.
A senior police official said the militants hurled grenades and opened indiscriminate fire at the paramilitary CRPF troops on Wednesday afternoon and tried to force their entry inside the camp. However, the CRPF guards retaliated with automatic fire.
The officer said that militants later entered in a hotel in Lal Chowk, hurled grenades and were firing at the surrounding guards.
Heavy police and paramilitary reinforcements have been moved into Lal Chowk, which has now been cordoned off.
The shopkeepers in the city centre pulled down their shutters and shoppers and pedestrians ran for security.
"We have surrounded the area where the militants are holed up and we have moved in police and paramilitary reinforcements to the area," the officer added.
No group has yet claimed responsibility for the attack.
"I can hear sounds of intermittent gun shots and we are trying to move out from the area," said Javed Ahmed, a local shopkeeper.