Police said the fire was put off after five fire tenders battled the blaze for several hours. A short circuit is believed to have caused the fire.
The fire broke out in Mahabubgunj in the busy Malakpet area around 1 a.m., triggering a series of blasts.
Thick clouds of smoke engulfed the area while flames leapt out with every blast. The fire fighters had a tough time controlling the flames due to the blasts.
The incident ahead of Deepavali exposes the negligence of authorities because storing and selling of firecrackers in a residential area is prohibited. The owner of Bhavani Fireworks had stored a large quantity of firecrackers in the building for the upcoming festival.
Local legislator Ahmed Bilala of the Majlis-e-Ittehadul Muslimeen (MIM) blamed the authorities for the accident. He said it could have caused a major tragedy.
Residents of the area pointed out that while Mahabubgunj had vegetable and grain shops, the firecracker shop was allowed to run in violation of the rules.
Police said a case had been registered against the shop owner.
In 2007, four child workers were killed in an illegal firecracker manufacturing unit at Goshamahal in Hyderabad.
The city also witnessed a major fire in a firecracker shop in Siddiamber Bazar in 2002, killing six people.