(Updates with comment from former prime minister Sharif)

By Imtiaz Shah

KARACHI, Dec 2 (Reuters) - Four people were killed in clashes between rival factions in Pakistan's Karachi city on Tuesday but police said they were hopeful violence was easing off after days of bloodshed in which dozens of people have been killed.

Karachi is Pakistan's biggest city and commercial hub and has a long history of political, ethnic and religious violence.

The latest clashes between ethnic-based factions have raised fears of a return to the chronic bloodshed that plagued the city in the 1990s.

The clashes broke out on Saturday between members of the city's majority community of Urdu-speakers, most of them descendents of migrants from India at the time of the partition of the India in 1947, and ethnic Pashtuns from northwest Pakistan.

City police chief Waseem Ahmed said four people were killed in different incidents in the early hours of Tuesday but the city had been mostly calm since then.

"There has been no major incident since the morning," Ahmed told Reuters.

At least 40 people have been killed since Saturday, according to a tally of reports from police and hospitals.

Rivals fought gun battles and burned shops and cars in several parts of the city of 15 million people over the weekend and more disturbances erupted on Monday.

Police have been told to shoot trouble-makers on sight and have banned pillion riding on motor bikes.

SCHOOLS SHUT, PORT OPEN

Some commentators in Pakistan have raised the possibility of Indian instigation of the violence in Karachi as a response to last week's militant assault in Mumbai, which India has linked to Pakistan, although the government has not suggested any link.

Former prime minister Nawaz Sharif said he was surprised by the timing of the Karachi violence.

"The killings in Karachi erupted suddenly after the Mumbai incident," Sharif told reporters. "I'm surprised how it erupted all of a sudden ... I think this needs to be looked in to thoroughly, which forces are involved in it."

All schools and colleges in Karachi were shut for a second day on Tuesday and public transport was thin. But operations at the country's main port were normal, while financial markets and banks were open.

Ahmed said the violence had been confined to certain neighbourhoods where members of the rival factions lived in close proximity and police convoys were patrolling those hotspots.

Tension has been rising since leaders of the Urdu-speaking community began complaining that Taliban militants, most of whom are ethnic Pashtun, were gaining strength in the city.

A political party representing Urdu-speakers, who are known as mohajirs, or refugees, has been the dominant political force in the city since the 1980s.

A large number of Pashtuns and members of other Pakistani ethnic groups have flocked to Karachi over the years in search of work. (Writing by Aftab Borka; Editing by Robert Birsel and Sanjeev Miglani)

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