You still don't get it, do you? Some people come openly in support of militants, only because the Indian State allows and encourages them to do so. It is very easy to put an end to that - they can decide not to handover dead bodies of militants to their families, or they can arrest or harass anybody who attends a funeral. But the Kashmir police is a lot smarter than that, they (and the IB) actively encourage these funeral processions, for reasons easy to guess.
You think Pakistan's militants didn't have any local support? You think when the TTP ruled Swat valley, nobody there supported or sympathized with them? I am not trying to compare militancies - my point is that militants will always have some support from people who follow their ideologies, but how much those supporters are allowed to express that, is usually left for the State to decide, assuming the State has control over such decisions.
Make no mistake - if some supporters turn up at the funerals of dead militants in Kashmir, that is only because the Indian State and Kashmir govt allows that to happen, which is in their best interest.