A Manhattan grand jury today refused to indict Bernhard Hugo Goetz, the so-called "subway vigilante," for attempted murder and indicted him on charges of illegal possession of a loaded pistol and with concealing two guns in his apartment.

While the maximum penalty involved in the weapons counts is seven years in prison, Goetz could have faced a maximum 25-year sentence had he been convicted of attempted murder, with which he was charged when arrested.

The grand-jury action apparently reflected the nationwide outpouring of sympathy for Goetz after he allegedly shot four youths who he said threatened him aboard a subway Dec. 22.

The electronics expert, 37, became a hero to some who saw him as fighting criminals in self-defense, although he was widely criticized by others as a vengeance-seeking vigilante who tried to kill with little provocation. Goetz had been robbed and beaten by several youths four years ago.

Manhattan District Attorney Robert Morgenthau said in an interview that the decision "does not carry any great message or far-reaching implications. The grand jury found he was justified in using physical force because he reasonably believed he was going to be robbed."

Barry Slotnick, one of Goetz's attorneys, said the decision, binding in the absence of new evidence, "practically is an exoneration of our client."

Joseph Kelner, another Goetz attorney, said Goetz would plead not guilty at his arraignment scheduled Feb. 6. Goetz, who surrendered Dec. 31 in Concord, N.H., is free on $50,000 bond.

"He is not gloating," Kelner said of Goetz' reaction to being indicted on lesser charges. "He is humbly grateful. He is gratified . . . . "

Kelner added, however, that the decision "cannot be taken as a signal that people should take the law into their own hands."

Howard R. Meyer, attorney for one of the youths involved in the incident, described the grand-jury action as shocking.

"He shot four kids with dum-dum bullets, two of them in the back," Meyer said. "What kind of a hero is that? He's white, and the four kids he shot were black. It is absurd to think he did not intend to murder them." Morgenthau's office had no comment on the type of bullet involved.

According to police accounts and Washington Post interviews with two of the victims, Goetz was approached on the subway by Troy Canty, 19, who asked him for $5.

Goetz told the youth, riding with three friends, "I'll give it to you," then pulled a .38-cal. revolver from his coat and fired five shots at the four, the accounts said.

Two of the youths were seriously wounded, including Daryl Cabey, 19, who is comatose with extensive brain damage. Police said the youths had extensive criminal records for robbery and were carrying screwdrivers.

In an interview, Barry Allen, 19, one of the youths, said they had no intention of robbing Goetz but were on their way to pry open and steal from video machines in downtown arcades.

Meyer said Cabey's family has retained attorneys preparing to file a damage suit against Goetz.

Goetz, described by family and friends as highly upset after his 1981 mugging, told police in a taped confession that he intended to kill the youths, according to police sources.

New York Mayor Edward I. Koch said of today's action, "I believe in the grand-jury system. Whatever they thought was appropriate, I have no fault to find."

Gov. Mario M. Cuomo noted that, since neither Goetz nor the youths testified before the grand jury because Morgenthau refused to grant them immunity, the jurors "had to come to their conclusion on the skimpiest of evidence."

Nonetheless, he added, "I'm going to assume they did it responsibly."

A source close to the grand jury said that the group was racially representative. While Cabey's attorney has raised the racial issue, many blacks, victims of crimes themselves, have expressed support for Goetz.