At least 80 people were killed in attacks apparently aimed at tourists in India's financial capital Mumbai yesterday night and TV channels said Westerners were being held hostage at two five-star hotels.

At least 250 people were wounded, police said. Indian television channels reported the chief of Mumbai's police anti-terrorist squad, Hemant Karkare, was among those killed.

Attackers targeted the Cafe Leopold, perhaps the most famous restaurant and hang-out for tourists in Mumbai, as well as hospitals and railway stations.

"I guess they were after foreigners, because they were asking for British or American passports," said Rakesh Patel, a British witness who lives in Hong Kong and was staying at the Taj hotel on business. "They had bombs."

"They came from the restaurant and took us up the stairs," he told the NDTV news channel, smoke stains all over his face. "Young boys, maybe 20 years old, 25 years old. They had two guns."

India has suffered a wave of bomb attacks in recent years. Most have been blamed on Islamist militants, although police have also arrested suspected Hindu extremists thought to be behind some of the attacks.Police said targets included the luxury Taj and Oberoi hotels, with television stations showing the lobby of both hotels on fire and people being evacuated from the Oberoi with their hands on their heads.

Fresh explosions were heard in the early hours of the morning.

"An encounter is going on at the two hotels, the situation is grave," Vilasrao Deshmukh, the chief minister told CNN-IBN TV. "Our men are on the job."

Maharashtra state police chief A.N. Roy said attackers had fired automatic weapons indiscriminately, and used grenades, adding that they were still holed up in some buildings.

"These are terrorist strikes in at least seven places," he told the NDTV news channel.

"Unknown terrorists have gone with automatic weapons and opened fire indiscriminately. At a few places they even used grenades."

Some of the injured were evacuated from the Taj on the hotel's golden luggage carts, while waiters in black and white formal wear and chefs were seen leaving the Oberoi.

"The lobby of the Taj hotel is on fire," a police spokesman said. "We are trying to find out how many people are inside the hotel."

Sourav Mishra, a Reuters reporter, was with friends at the Cafe Leopold when gunmen opened fire around 9.30 p.m. He has received injuries and is in St George's Hospital.