Police, however, said they were still confirming about the firing incident.
The two injured people were taken to Srinagar for specialised treatment.
The incident took place when an angry mob started pelting stones at security forces following the death of a foreign militant - identified as Mehmood Bhai of the Lashkar-e-Taiba (LeT) outfit - in a gunfight with security forces.
The gun battle started Sunday evening in Krankshevan area of the town where security forces surrounded a house on receiving information about two-three guerrillas hiding inside.
While the foreign guerrilla was killed, an associate believed to be a local escaped from the site.
Immediately after the news spread in the town, angry youths started pelting stones at security forces.
People took part in a large procession carrying the body of the young man.
Administration officials have rushed to the spot to look into the law and order situation.