The incident occurred at Ravidaspur residential under Kshetripura police station.
A minor dispute emerged over bursting firecrackers escalated into violence, creating a tense situation.
According to the police, a group of children were bursting crackers during Friday noon, which led to tension in the area.
The members of the right-wing organisations supported the children.
Heated arguments escalated further and people from both communities pelted stones at each other in which vehicles parked on the roadside were damaged.
"In Ravidaspura, where a mixed population of two communities live, a few children were bursting firecrackers around 2 p.m. on Friday. However, this issue escalated when more people from the neighbouring areas intervened also with their earlier issues, said Indore Deputy Commissioner of Police (DCP) Rishikesh Meena.
Prompt action from the local area police, however, managed to bring the situation under control.
Heavy police personnel have been deployed and the area has been cordoned off.
The police also carried a flag march.
"The situation is normal now, police are deployed and an FIR is being registered. We are taking note of the CCTV footage. Strict action will be taken against all the miscreants. We have identified a few people through a video," Meena added.
A couple of videos surfaced on social media showing a large number of people, damaged vehicles and other properties on the roadside.
At least six persons were injured in the violence and they were admitted to the hospital for treatment.
The police said an FIR has been registered in the matter and the CCTV cameras are being monitored to identify the persons involved in creating violence.
"A dozen CCTV footages have been collected and monitoring is being done. Some of the accused have been identified," the police added.
Meanwhile, the Indore police have also appealed to citizens not to pay heed to rumours spread on social media.
"At present, the situation is completely under control. People are requested not to believe in rumours spread through social media posts," the police said