One person was killed and 15 injured when militants hurled a grenade at a police party near the main bus stand at Pulwama, 35 km from Srinagar, on Tuesday afternoon.
The injured were taken to a nearby hospital, sources said.
Doctors there referred seven critically injured, including four policemen, to Srinagar for specialised treatment.
Police and security force officers rushed to the spot immediately and the area around the bus stand was cordoned off.
No one has yet claimed responsibility for the blast.
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