After a scuffle broke out shortly after midnight Saturday in a festival tent, a group of about 50 mostly young Germans apparently chased the eight Indians, who fled into a pizzeria. According to police, the German mob kicked in the door to the restaurant.
Around 70 police officers were needed to break up the assailants. In the ensuing melee, all eight Indians and four Germans -- among them two police officers -- were injured. Two of the wounded had to be treated in hospital.
A large crowd apparently witnessed the violence.
"We're not ruling out a xenophobic motive," Bernd Merbitz, police chief of Saxony told German news agency DPA.
Authorities have formed a task force to investigate the incident. There were no news of arrests.
The incident took place in Mügeln, about 45 kilometers east of Leipzig, the largest city in Saxony.
The Leipziger-Volkszeitung daily in Leipzig reported on Monday that the German mob had shouted xenophobic slogans.
Reinhard Böttcher of the local police force said he couldn't confirm the report but added that according to eye witness statements, the mob could have shouted right-wing insults.
The paper also reported that the German mob had smashed the window panes of the pizzeria and damaged the owner's car.
"If the police hadn't come, something much worse might have happened here," the paper quoted the pizzeria owner as saying.
Mügeln's mayor, Gotthard Deuse, told the paper he believed the incident was racially motivated and that right-wing slogans were chanted.
"Alcohol played a role"
It remains unclear what sparked the incident and whether the large crowd of onlookers cheered on the mob or failed to intervene.
"The fact is -- alcohol played a role at the time," Böttcher said. Saxony police revealed news of the incident almost a day after it took place.
Formerly part of Communist East Germany, Saxony has seen a high rate of violence and racially-motivated attacks against foreigners since German reunification in 1990. Eastern Germany is also grappling with a resurgence in right-wing extremism after recent electoral successes of the far-right NPD party.