SRINAGAR, India - Indian troops shot dead two militants on Thursday to end a nearly 24-hour siege at a hotel in the centre of the summer capital of Indian Kashmir, a senior police officer said.

The hotel was left in flames after the operation by security forces to break the stand-off that began when the attackers threw grenades and opened fire in Srinagar's main market area.

A police officer was killed in Wednesday's gunbattles and one civilian died later of his injuries, police said. Eight other civilians were injured. "The operation as far as we are concerned is over," Kuldeep Khuda, the state police chief, told reporters at the scene.

Khuda said the police had cleared the building from top floor before encountering and killing the first militant this morning.

"The other terrorist tried to set the building on fire and the building had caught fire and he tried to make his escape but he was shot down," Khuda said.

"We are trying to find out if any more terrorists were inside but there are two bodies that are visible."

The Indian-administered section of Muslim-majority Kashmir has been wracked by a separatist insurgency for two decades, though violence had fallen in recent years.

Officials had sealed all the roads leading to Lal Chowk - the main city square that was under siege.

A pro-Pakistan militant group, Jamiat-ul-Mujahedin, said it was behind the assault.

Overnight, police fired teargas to disperse scores of pro-militant Kashmiri youths who threw stones at security forces, chanting "Kashmiri Mujahedeen, we are with you" and "We want freedom".

The last such militant attack in the city was staged by two militants on a paramilitary camp in October 2007. The two gunmen were eventually killed while three soldiers were wounded.

The unrest in Kashmir has so far left more than 47,000 people dead, according to official figures.