SRINAGAR, Dec 24: Two people died and 28 others, mostly civilians, were wounded when a grenade aimed at soldiers near a Muslim shrine missed its target and exploded in a busy market on Friday, police said.

The attack initially wounded 30 people but two of the injured died later in hospital, a police spokesman said. "Two of the injured are policemen, while others are all civilians," he said.

Most of the victims were devotees coming out of the shrine, police and witnesses said. The explosion took place in Pakherpora township, 50km southwest of Srinagar, police said. It sparked panic in the area and sent people rushing for cover.

Indian troops and police sealed off the area and began a search operation. Separately, Indian troops shot dead four militants in two clashes overnight, a police spokesman said.

"Both the encounters erupted after troops launched a cordon-and-search operation for the militants," he said. Fresh violence hit the region as the tiny Christian community prepared for Christmas by buying cakes and confectionery.

"I pray the day of Christmas passes off peacefully," said Elax Sawhney, a Srinagar resident. Christians were seen cleaning their places of worship for the Saturday service. Volunteers had strung decorations across churches in Srinagar. -AFP