By Rituparna Bhowmik

PUNE (Reuters) - Security officials were investigating the possible involvement of Pakistan-based militants in a bomb blast in Pune that killed nine people, but New Delhi said talks with Islamabad later this month would go ahead.

The bomb, left in a backpack at the popular German Bakery on Saturday, wounded 60 and appeared to target Indian and foreign tourists.

Senior internal security sources, who declined to be named, said the focus had fallen on Pakistan-based separatist group Lashkar-e-Taiba (LeT), which has been blamed for the Mumbai attacks, and a local militant group called Indian Mujahideen (IM) because both had been behind bombings in India in the past.

"As of now our line of investigation is towards the possible involvement of LeT ... a sleeper module of the Indian Mujahideen could also be involved," a senior interior security official overseeing the investigation told Reuters.

Both groups are fighting against Indian rule in Kashmir, the disputed Himalayan region.

"Nothing is ruled out, nothing is ruled in. The investigation is in progress," Home Minister Palaniappan Chidambaram said.

On Friday, India and Pakistan agreed to high-level talks in New Delhi on Feb. 25, suspended after Pakistani militants killed 166 people during a three-day rampage through the financial capital of Mumbai in November 2008.

Any sign of Pakistani involvement in the Pune attack would worsen relations between the two nuclear rivals and further destabilise a region overshadowed by war in Afghanistan.  

The main opposition Bharatiya Janata Party said India must "seriously reconsider" going ahead with the talks, but a government official said the talks were on track.

"The talks are going to go on schedule. We realise there are complexities in engaging Pakistan, but we have to see things in their entirety. And at this moment, there is no reason for the talks to not go on," the official said.

SOFT TARGET

Police in Pune, about 160 km (100 miles) south of Mumbai, had been alerted to the possibility of attacks on Osho ashram and Chabad House, which had also been targeted during the Mumbai attacks, Chidambaram said.

The German Bakery restaurant, located close to a Jewish centre and a religious retreat frequented by foreigners, was a soft target in an area that had been on the radar of intelligence officials, Chidambaram said, denying there was an intelligence failure.

The Pune ashram was one of the sites surveyed by David Headley, arrested in the United States last year and charged with scouting targets for the Mumbai attacks.

The Pune blast also appears similar to a wave of bombs that hit Indian cities in the year before the Mumbai attacks, killing more than 100 people. Police blamed most of those attacks on home-grown Muslim militants like the IM, but Hindu militants were also accused of masterminding some of the bombs.

"The bomb appears to have been not a sophisticated one that could have required any special training. The expertise involved could have been locally acquired," said B. Raman, director of the Chennai-based Institute For Topical Studies.  

An Italian woman and an Iranian man were among those killed. The 12 foreigners injured included Iranians, Yemenis, Sudanese, Nepalis, a Taiwanese and a German, Police Commissioner Satyapal Singh told reporters.

"We are awaiting forensic and intelligence reports. It is too early to say anything now," Singh said.

Authorities have warned of renewed threats of attacks on Indian soil and stepped up security in recent months.

Airports and railway stations across the country have been put on high alert after the blast and extra security given to the South African and Indian cricket teams in India.

(Additional reporting by Bappa Majumdar and Krittivas Mukherjee; Writing by Rina Chandran; Editing by Janet Lawrence)