Elite Indian commandos today fought room-to-room battles with Islamist militants inside two luxury hotels in Mubai to save scores of people trapped or taken hostage, as the Indian prime minister blamed neighbouring countries.
Manmohan Singh blamed militant groups based in India's neighbours -- usually meaning Pakistan -- raising fears of renewed tension between the nuclear-armed rivals.
Helicopters buzzed overhead and crowds cheered as the commandos, their faces blackened, moved into the Trident-Oberoi, where 20 to 30 people are thought to have been taken hostage and more than 100 others were trapped in their rooms.
Explosions rattled the nearby Taj Hotel, a 105-year-old city landmark on the waterfront, as the troops tried to flush out the militants there. Fire and smoke plumed from an open window.
At least six foreigners, including a Briton, one Australian, an Italian and a Japanese national were killed, and police said another 287 people were wounded.
Those who survived told harrowing stories of close encounters. Australian actress Brooke Satchwell, who starred in the Neighbours television soap opera, said she narrowly escaped the gunmen by hiding in a hotel bathroom cupboard.
"There were people getting shot in the corridor. There was someone dead outside the bathroom," the shaken actress told Australian television. "The next thing I knew I was running down the stairs and there were a couple of dead bodies across the stairs. It was chaos."
Commandos had also gathered outside a Jewish centre where a rabbi is thought to have been taken hostage, but later apparently decided to hold off from an assault.
A militant holed up at the centre phoned an Indian television channel to offer talks with the government for the release of hostages, but also to complain about abuses in Kashmir, over which India and Pakistan have fought two of their three wars.
"Ask the government to talk to us and we will release the hostages," the man, identified by the India TV channel as Imran, said, speaking in Urdu in what sounded like a Kashmiri accent.
"Are you aware how many people have been killed in Kashmir? Are you aware how your army has killed Muslims?"
WALKING THROUGH BLOOD
Around two dozen militants in their early 20s, armed with automatic rifles and grenades and carrying backpacks full of ammunition, came ashore in a rubber dinghy on Wednesday and fanned out across Mumbai's financial and tourist heart.
They commandeered a vehicle and sprayed passersby with bullets, fired indiscriminately in a train station, hospitals and a popular tourist cafe. They also attacked two of the city's poshest hotels packed with tourists and business executives.
"We threw ourselves down under the reception counter," Esperanza Aguirre, head of Madrid's regional government, said.
"I took off my shoes and we left being pushed along by the hotel staff," she said. "I didn't see any terrorists or injured people. I just saw the blood I had to walk through barefoot."
Some 22 hours after the late-evening assault, soldiers and militants were still exchanging intermittent fire and scores of 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 NDTV news. "But there are guests in the rooms, we don't know how many."
A senior India home ministry official said 20-30 people could still be held hostage in the Trident/Oberoi hotel.
"EXTERNAL LINKAGES"
Singh said New Delhi would "take up strongly" the use of neighbours' territory to launch attacks on India.
"The well-planned and well-orchestrated attacks, probably with external linkages, were intended to create a sense of terror by choosing high-profile targets," Singh said in an address to the nation.
The use of heavily armed "fedayeen", or suicide attackers, bears the hallmarks of Pakistan-based militant groups like Lashkar-e-Taiba or Jaish-e-Mohammed, blamed for a 2001 attack on India's parliament.
Both groups made their name fighting Indian rule in disputed Kashmir, and were closely linked in the past to the Pakistani military's Inter Services Intelligence agency, the ISI.
It is hard to imagine Pakistan's government supporting such an attack, but militants, possibly backed by rogue elements in the ISI, might want to undermine the India-Pakistan peace process and Pakistan's civilian government of President Asif Ali Zardari.
Lashkar-e-Taiba denied any role in the attacks, and said it had no links with any Indian group. Instead, the little-known Deccan Mujahideen claimed responsibility.
"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 attacks were bound to spook investors in one of Asia's largest and fastest-growing economies.
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.
One of the first targets was the Cafe Leopold, a famous hangout popular with foreign tourists.
The attackers then appeared to target British, Americans and Israelis as they sought hostages in the hotels and elsewhere.
Mumbai has seen several major bomb attacks in the past, but never anything so obviously targeted at foreigners.
England and India cricket boards cancelled their last two games in a seven-match series following the attacks.
The attacks were 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," he said.
Police said they had shot dead seven gunmen and arrested nine suspects. They said 12 policemen were killed the chief of the police anti-terrorist squad in Mumbai.