Officers said the gunfire in Nowhatta has now stopped and combing operations are on.
Terrorists struck at Nowhatta area of downtown Srinagar this morning, triggering a nearly five-hour encounter to flush them out. At the end of it, five terrorists were killed. A Central Reserve Police Force officer died and nine others were injured in the encounter.
The attack started around 8 am, officials said. The CRPF men, who were patrolling the largely residential area, were fired on from three sides. When they retaliated, the terrorists ran into the neighbouring houses.
Among the injured are eight men from the CRPF and one police officer. Three of them are in a critical condition and will be sent to Delhi by air ambulance, doctors said.
Nowhatta is not far from Srinagar's Bakshee Stadium, where Chief Minister Mehbooba Mufti participated in the Independence Day celebrations. The capital of Jammu and Kashmir is on high security alert for Independence Day.
The attack came as Prime Minister Narendra Modi was delivering his Independence Day speech at Delhi's Red Fort. PM Modi criticised Pakistan in strong words, accusing it of supporting terrorism.
"When terrorists killed innocent children in Peshawar... there were tears in the eyes of India's Parliament, India's schools, India's children... This is our nature. But look at the other side. They glorify terrorists. They celebrate when innocent lives are lost. What kind of terror-inspired people and governments are these?" said PM Modi, who has accused Pakistan of instigating the violence and unrest in Kashmir since last month.
More than 50 people have died and thousands have been injured in clashes between protesters and security forces since July 8, when violent protests erupted after 22-year-old Hizbul Mujahideen terrorist Burhan Wani was killed by security forces.
Many parts of Srinagar, including the Nowhatta area, have been under curfew since then. Security was tightened even more with separatists urging people to observe a "black day" today.
Security forces have also foiled an attempt by terrorists this morning to infiltrate into India in Uri, about 70 km from Srinagar. Two terrorists have been killed.