Over 75 government employees with terror links have been dismissed so far by the LG administration.
Two suspects have been detained from the encounter site, a police spokesman said.
Kashmir observed a shutdown for the fourth consecutive day on Thursday even as authorities continued curfew in several parts of the valley to prevent deterioration of law and order in the wake of killing of a youth allegedly in Army firing in Baramulla.
The chief opposition in the state, the Jammu and Kashmir People's Democratic Party has breached the stronghold of National Conference in prestigious Srinagar Parliamentary constituency by gaining a lead in five seats with Chief Minister Omar Abdullah trailing in Sonawar seat.
Suspected terrorists fired two rounds of rocket projectile explosives at an army camp in Batamaloo area of the city but no causality was reported, officials said.
Two traffic cops, including an assistant sub-inspector, and two civilians were injured in a powerful hand grenade explosion in the Batmaloo locality of Srinagar on Monday evening. Earlier in the day, terrorists killed a shopkeeper in the Kreeri town of north Kashmir's Baramulla district.
Funeral prayers in absentia were offered for slain Al Qaeda chief Osama bin Laden in various mosques in Jammu and Kashmir capital Srinagar and other towns after the congregational Friday prayers.
Authorities in Jammu and Kashmir imposed curfew in most parts of the Valley on Saturday, following which, all the shops closed down and streets were left deserted.
A station house officer and his bodyguard were shot at and injured by terrorists in the Batmaloo area of Srinagar on Tuesday evening.
Following the incident, tension gripped the area and all shops have been shut down, the official said.
In Srinagar city, prohibitory orders have been imposed in areas falling under 13 police stations of Nowhatta, Khanyar, Maharajgunj, Rainawari, Safakadal, Soura, Lalbazar, Nigeen and Noorbagh in old city and Batmaloo, Maisuma, Kralkhud and Shaheedgunj in uptown, police said.
Authorities today the curfew from Sopore town and restriction on movement of people across Kashmir Valley but life continued to remain disrupted due to a week-long shutdown called by the separatists. The situation in Batmaloo in central Srinagar was, however, tense following death of a youth in a road mishap involving a police vehicle in the locality on Monday morning.
Army columns were deployed in the entire city, which saw widespread violence in Batmaloo and Maisuma locality resulting in the death of three people on Tuesday.
After days of calm, fresh violence erupted in Srinagar leaving three persons dead following which indefinite curfew was clamped in Srinagar on Tuesday.
The Army was deployed Tuesday late night in Srinagar and indefinite curfew imposed as fresh violence erupted in Kashmir Valley, claiming four lives and leaving over 70 injured after days of calm.
Eight people, including six civilian passers by and two paramilitary troopers were wounded in a grenade attack in Srinagar on Wednesday afternoon.
Two government school teachers, including a woman, were shot dead by terrorists in Eidgah area of Srinagar amid increasing attacks on civilians in Jammu and Kashmir, police said.
The SIT headed by central Kashmir police chief Farooq Ahmad presented the challan.
Many Kashmiris have been left with no option but to flag down the odd private vehicle passing by in the Valley.
Dr Sheikh Jalal, a leading cardiologist of Kashmir was seriously injured in a militant ambush that left his two police guards dead.
Former union minister and senior Congress leader Saifuddin Soz was hackled in one of the relief camps in Kashmir with flood victims expressing anger over alleged absence of state government officials during relief works.
Geelani, chairman of hard-line Hurriyat Conference, also tried to defy the house arrest and lead a march towards the UNMOG.
The martyred policemen were identified as Constable Ishfaq Ahmad Mir, Constable Javaid Ahmad Bhat, Constable Mohammad Iqbal Mir and SPO Adil Manzoor Bhat.
The official said five civilians received bullet injuries in the cross-firing near the gunfight site.
The officials said they had no information other than that Azhar was undergoing treatment at an army hospital after suffering renal failure.
With the flood threat continuing to loom large over the valley, the Army has started the evacuation process in Srinagar as the city experienced fresh rainfall on Tuesday.
Hundreds of people trapped in floods-ravaged Jammu and Kashmir with some left marooned on rooftops and others clinging to trees are in dire need of water and food.
The Indian Army, the Border Security Force, Hindu temples and the people of India, all have been targetted by fidayeen from Pakistan.
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