Security forces on Monday tightened the cordon in the locality. The militants had earlier allowed the wife of the house owner they were hiding in to leave the building, police said.
Police later asked the militants to surrender but the ultras refused. Around 6am, the militants made an attempt to break the cordon by firing at the security fortification set up around the area.
On Sunday, the militants had taken shelter inside a house in Shadab Colony near Ahl-e-Hadees Mosque on the 90-feet road. A brief exchange of firing took place between the police and militants on Sunday evening.
Two CRPF jawans and one policeman were injured in the encounter. One critically injured cop has been admitted to a nearby hospital.
The operation was halted on Sunday night and started again on Monday with security forces exploring options like detonating the house with explosives and storming it.
The standoff between the militants and security forces has come weeks ahead of polling in Srinagar on May 10.