In the nearly 22-hour Kashmir city centre gun battle, heavy exchange of fire continued into Saturday morning with no change in the overall situation.
So far, two paramilitary soldiers have been killed and 25 others are injured including 10 securitymen and nine journalists.
Securitymen are exchanging heavy automatic fire with two militants holed up in a hotel and an adjacent shopping complex.
An area of around 3 sq km in and around Lal Chowk remained sealed on Saturday morning with security forces allowing no civilian movement. The only vehicles on the roads are mobile bunkers, bullet-proof jeeps and bullet-proof vehicles of officals.
"We have spotted the two militants and the operation was restarted with sunrise on Saturday. We hope to finish it soon," a senior police officer told rediff.com.
Thousands of civilians around Lal Chowk spent a sleepless night following the gun battle on Friday night.
Schools in the affected areas have been closed today, officials said. They said certain precautionary measures have been taken to minimise civilian causualties.
Meanwhile, one of the nine journalists injured is battling for his life in the hospital. Muzafar Ahmad Bhatt, cameraman of Sahara television, is battling for life in the Sri Maharajha Hari Singh Hospital. He was one of the nine newsmen who were injured during a shoot out between the fidayeens and the security forces on Friday evening at Lal Chowk. If his condition does not improve, he may be flown to Delhi for treatment.
Mehbooba Mufti, chairperson of the ruling People's Democratic Party and member of Rajya Sabha, visited the injured newsmen in the SMHS hospital late on Friday night and inquired about their health.
Speaking to rediff.com on phone from Srinagar, Mufti said that Muzafar continued to be in a critical condition. "I visited the hospital on Friday night and talked to newsmen and others injured. One of Muzafar's kidneys had to be removed in an operation to save his life. Doctors are monitoring his condition round the clock," she said.
When asked whether she was surprised at the fidayeen attacks that are increasing in numbers in recent weeks, Mufti said, "No. The desperate terrorists would go to any extent. They are now chosing places like Lal Chowk because they are assured of continuous coverage on television more like a one-day game. If these encounters take place in remote villages then no one bothers about them because the media is not there. I am glad that despite the efforts to create panic among the tourists, the hotels in the Valley are full and people are going about their business as usual," she added.