updated 9/19/2008 5:22:39 AM ET 2008-09-19T09:22:39

Indian police battled suspected Islamic militants holed up in a house in the country's capital Friday, killing two and arresting one before the others escaped, police said.

The gunbattle in a southern part of sprawling New Delhi put the city back on edge days after five coordinated bombings in the capital's markets killed 21 people — attacks credited to homegrown Islamic militants.

A senior New Delhi police officer, Karnal Singh, told reporters at the scene of Friday's firefight in the Jamia Nagar neighborhood that there were five gunmen. Two were killed, one was arrested and two escaped, he said.

Police spokesman Rajan Bhagat said two policemen were wounded in the fighting.

"A sizable amount of arms and ammunition was discovered in the house," said Bhagat. "The area has been cordoned off, and we are continuing our investigation."

Soon after the gunbattle broke out around noon Friday, scores of police officers, many in riot gear, could be seen fanning out through Jamia Nagar, a leafy lower middle-class neighborhood. The scene was chaotic with authorities trying to get civilians out of harm's way while subduing the militants.

A group calling itself the Indian Mujahideen has claimed responsibility for the New Delhi attacks. It also said it was behind bombings that killed 61 people in the western city of Jaipur in May and July blasts in the western state of Gujarat that killed at least 45.

Alleged safe house
Police apparently zeroed in Friday on one New Delhi house after interrogating a man detained after the Gujarat bombings, The Press Trust of India news agency reported.

The man, identified as Abu Basher, said the home in quiet Jamia Nagar was used as a safe house by Islamic militants plotting attacks around India.

The Indian Mujahideen was little known before this year's bombings, and police believe it may be a front for the Students' Islamic Movement of India, or SIMI, which was banned in 2001.

India has routinely blamed Pakistan or Bangladesh-based militant groups for dozens of attacks in the last three years.

But as the death toll has mounted this year, evidence has pointed to the involvement of Indian Muslims, raising difficult questions for the government about growing anger among India's large Muslim minority.

PM: Indians possibly behind attacks
On Wednesday, Prime Minister Manmohan Singh made a rare acknowledgment that Indians — and not foreign Islamic groups — may have been behind the New Delhi attacks, but cautioned the country's security services were facing "vast" intelligence gaps.

Several alleged SIMI activists have been rounded up in recent months, but police have made little apparent headway in finding those behind the attacks.

Authorities believe the Islamic militants aim to spread fear among ordinary Indians and provoke violence between the country's Hindu majority and Muslim minority.

Relations between Hindus, who make up more than 80 percent of India's population, and Muslims, who account for about 130 million of India's 1.1 billion people, have been relatively peaceful since the bloody partition of the subcontinent into India and Muslim Pakistan at independence from Britain in 1947. But there have been sporadic bouts of violence.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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