Three Indian Army soldiers were injured after militants opened fire on an army convoy near a hospital on Parimpora-Pantha chowk bypass road in Srinagar.
The militants opened fire on the convoy near SKIMS Hospital Bemina at around 1:15 pm, an official said.
He said the last vehicle of the convoy was hit by the bullets and the troops retaliated.
The area has been cordoned off and combing operations started to track down the militants, the official said.
Earlier in the day, gunshots were heard in the commercial hub of Lal Chowk and adjoining areas in Srinagar, triggering panic in the busy market place.
"Firing of gunshots has been reported from Lal Chowk area. We are investigating the incident," a police official said.
Most of the business establishments downed their shutters while pedestrians ran towards safer places as people had apprehensions about a militant attack in the area.
According to eyewitnesses, cops had fired few rounds in the air to stop a mentally-challenged person who created panic among people.
"This person entered a hotel and asked people to leave saying the militants had entered the building.A police team rushed to nab the person who tried to flee, forcing the cops to fire warning shots," they said.
There was a boy who tried to enter the Taj hotel, I think he is mentally deranged. He is with us, there is nothing to panic: SP, Srinagar pic.twitter.com/r3bwHFvmr2