Four to five terrorists dressed in military fatigues opened random fire at a crowded market in Assam's Kokrajhar town on Friday, killing 12 civilians.
One of the attackers was also killed.
Assam Police chief Mukesh Sahay said he suspected the National Democratic Front of Bodoland (NDFB - Songbijit) was behind the attack whose victims were mainly Bodo civilians.
Nearly 20 others were injured.
"A group of militants came to the weekly market, hurled a grenade and then fired indiscriminately at civilians, " Sahay told IANS.
He said the security forces present in the area retaliated and killed one of the militants.
"It has been a tactic with the militants to attack soft targets, " Sahay said.
"We have started an operation in and around the area.
We suspect the number of attackers was four or five. "
Kokrajhar town in lower Assam is located about 220 km from Guwahati.
It is Bodo tribal dominated area.
Security forces recovered an AK - 56 rifle and grenades from the spot.
The NDFB led by I. K. Songbijit is known as the "anti - talk faction" because of its opposition to peace talks with the government.
Hagrama Mohilary, Chief Executive Member of the Bodoland Territorial Council that runs the administration in four Bodo districts including Kokrajhar, said many people had been injured in the attack.
Assam Chief Minister Sarbananda Sonowal denounced the killings and vowed to take "strict action" against the perpetrators.
He told the media here that he telephonically informed both Prime Minister Narendra Modi and Home Minister Rajnath Singh about the killings.
The Chief Minister, who took charge of Assam in May heading the state's first BJP government, announced a compensation of Rs 5 lakh to the families of the dead.
"No one involved in the crime will be spared, " he said, adding "a foreign hand" may have ordered the killings.
In a bid to avoid retaliatory killings, the Chief Minister appealed for peace and harmony and said his government was committed to ensuring the safety of civlians.
The anti - talk faction of the NDFB had killed over 70 Adivasis in December 2014, forcing security agencies to launch a sustained operation against the group.
In New Delhi, Home Minister Rajnath Singh said the central government was closely monitoring the situation.