Indian commandos have freed hostages from Mumbai's Taj Mahal hotel but battled on with gun-toting Islamist militants who launched an audacious attack across India's financial capital, killing more than 100 people.
The gunmen arrived by boats in Mumbai, before fanning out and attacking luxury hotels, a landmark cafe, hospitals and a railway station, firing indiscriminately.
Some 17 hours after the late-evening assault, soldiers and militants were still exchanging intermittent fire and more than 100 people were trapped inside rooms of the Taj Mahal hotel, a 105-year-old city landmark.
"People who were held up there, they have all been rescued," Maharashtra state police chief A.N. Roy told the NDTV news channel. "But there are guests in the rooms, we don't know how many."
Roy said some people were still apparently being held hostage at the nearby Trident/Oberoi Hotel. "That is why the operation is being conducted more sensitively to ensure there are no casualties of innocent people."
Police said at least six foreigners were killed and another 287 people were wounded in the attacks, which were claimed by the little-known Deccan Mujahideen group.
"Release all the mujahideens, and Muslims living in India should not be troubled," said a militant inside the Oberoi, speaking to Indian television by telephone.
The man, who identified himself only as Sahadullah, said he was one of seven attackers inside the hotel, and wanted Islamist militants to be freed from Indian jails.
Later, an explosion was heard at the hotel, a Reuters witness said.
At least two guests, trapped in their rooms in the Taj, also phoned TV stations. One said the firedoors were locked, and another said he had seen two dead bodies by the swimming pool.
"Two of my colleagues are still in there and the last we heard from them was three hours ago and then the phone battery died," said a German national who escaped the Taj.
The attacks were bound to spook investors in one of Asia's largest and fastest-growing economies.
Mumbai has seen several major bomb attacks in the past, but never anything so obviously targeted at foreigners.
Authorities closed stock, bond and foreign exchange markets, and the central bank said it would continue auctions to keep cash flowing through interbank lending markets, which seized up after the global financial crisis.
Young men shooting indiscriminately
The militants struck at the heart of Mumbai's financial and tourist centre, with one of the first targets the Cafe Leopold, a famous hangout popular with foreign tourists.
They fired automatic weapons indiscriminately and threw grenades before settling in for a long siege at the Taj and the Trident/Oberoi.
"There could be 100-200 people inside the (Trident/Oberoi) hotel, but we cannot give you the exact figure as many people have locked themselves inside their rooms," Maharashtra state deputy chief minister R.R. Patil told reporters.
"There could be 10-12 terrorists inside the hotel," he said. "There are no negotiations with the terrorists."
The attackers appeared to target British and Americans as they sought hostages. Israelis were also among the hostages, a television channel reported, while police said an Israeli rabbi was also being held by gunmen in a Mumbai apartment. Witnesses said the attackers were young South Asian men in their early 20s, most likely Indians, speaking Hindi or Urdu.
Television footage showed gunmen in a pick-up truck spraying people with rifle fire as the vehicle drove down a Mumbai street.
Hotel staff evacuated wounded on luggage trolleys, with passers-by covered in blood after they rushed to help. Some clambered down ladders to safety.
Blow for ruling party, investment
The attacks could be another blow for the Congress party-led government ahead of a general election due by early 2009, with the party already under fire for failing to prevent a string of bomb attacks on Indian cities.
Strategic expert Uday Bhaskar said the attacks could inflame tensions between Hindus and Muslims.
"The fact that they were trying to segregate British and American passport holders definitely suggests Islamist fervour," Bhaskar said.
Police said they had shot dead four gunmen and arrested nine suspects. They said 12 policemen were killed, including Hemant Karkare, the chief of the police anti-terrorist squad in Mumbai.
Schools were closed and a curfew was imposed around the Gateway of India, a colonial-era monument. But train services were running as normal taking people to work in the stunned city.
Rakesh Patel, a British witness who was staying at the Taj Mahal hotel on business, said the attackers were looking for British and US passport holders.
"They came from the restaurant and took us up the stairs. They had bombs. Young boys, maybe 20 years old, 25 years old. They had two guns," he told the NDTV channel, smoke stains covering his face.
Japan's foreign ministry said at least one Japanese national had been killed and one injured in the attacks, while South Korea said 26 of its nationals had escaped unharmed.
Australian Prime Minister Kevin Rudd confirmed one Australian had been killed by the attacks in Mumbai, but it was possible the number of Australians killed could rise. Two other Australians were also injured in the attacks.
In Washington, the White House and President-elect Barack Obama condemned the attacks, as did France, current president of the European Union, and UN Secretary General Ban Ki-moon.
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