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NEW DELHI, Monday (Reuters) Police in New Delhi said they had killed two Muslim militants from a Pakistan-based Kashmiri rebel group, the latest in a spate of violence expected to turn India wary in a new bid for peace with Pakistan.

Officials and analysts said the violence could turn the mood in the country against Vajpayee's peace initiative, launched in April as a decisive bid to end animosity between nuclear-armed neighbours which last year went to the brink of war.

An Indian Foreign Ministry official said chances of progress in the peace initiative were tied to a return to normality in Jammu and Kashmir and an end to rebel violence, echoing comments Vajpayee made during a visit to the Himalayan region last week.

A wave of rebel violence rocked Indian Kashmir last week, coinciding with Vajpayee's visit along with his deputy L.K. Advani, and several state chief ministers.

"These incidents do not generate a favourable climate," Jammu and Kashmir chief minister Mufti Mohammad Syed told a news conference in the eastern Indian city of Calcutta. "But in spite of these incidents you have to go on (with the bid for peace)." Indian analysts said the past week's violence would inject a sense of caution into New Delhi's quest for peace.

"Vajpayee was cautious," said C. Rajamohan, strategic affairs editor at The Hindu newspaper, about the prime minister's statements in Kashmir last week.

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