Naresh Dhankar, 45, began his two-hour murder rampage in a hospital in Palwal, in Haryana state, then walked outside picking victims at random, police said.
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His first killing of an woman waiting for a relative in the hospital was caught on security cameras.
As police took the body of the woman to the morgue word came through of the other killings and a citywide alert was ordered.
Three of the dead were night watchmen and one was a beggar who had been sleeping in the street in the city about 60 kilometers (37 miles) north of New Delhi, police officials said.
All were beaten over the head with the iron bar by the former army lieutenant who has a master's degree in agriculture.
Dhankar was detained as he was attacking a seventh victim at another hospital.
"He attacked a woman at a hospital first. We rushed there and as we were scanning the CCTV footage we got to know that more bodies had been found," said police spokesman Sanjay Kumar.
"The accused has been arrested and is currently undergoing treatment at a hospital."
A TV grab showed Dhankar, wearing a blue pullover, walking with an iron rod in his hands.
As news of the attacks spread on social media, police appealed to residents of Palwal, ordering them to stay indoors.
Kumar quoted Dhankar's wife as saying he had been "mentally disturbed" for the past few days. The couple had been separated for several years.
"We are investigating to find out the exact motive behind the killings," the spokesman said.
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