。
She was leading her grandmother by the hand.
Literal
She [topic-は] grandmother [possessive-の] hand [object-を] was-pulling.
手を引く literally means 'to pull the hand,' but here it functions as 'to lead by the hand' — a gentle, caring gesture typically directed at the very young or elderly. Note this is distinct from the other common meaning of 手を引く, 'to withdraw from' or 'to back out of an involvement,' which uses the same phrase metaphorically. Context makes the physical, caregiving sense clear. The ~ていた form paints an ongoing scene in the past.