MUMBAI - Suspected Islamist gunmen launched waves of attacks in the heart of India's financial capital, killing at least 101 people and taking many foreigners hostage in two of the city's plushest hotels, police said on Thursday.
The late-night attacks sent shockwaves through an economy already under strain. Authorities closed stock, bond and foreign exchanges as commandos and armed police laid siege to the gunmen.
Some 16 hours into the crisis, scores of tourists remained trapped in the Taj Mahal hotel, a 105-year-old city landmark, and at the five-star Trident Oberoi in Mumbai's downtown peninsula, the city's financial and tourist heart, officials said.
At least 101 people were killed, including six foreigners, police said. Another 287 people were wounded in the attacks, which were claimed by the little-known Deccan Mujahideen group.
One militant inside the Oberoi told Indian television by phone that the hostages would only be freed when all mujahideens, or Islamic holy warriors, being held in Indian jails were freed.
The man, who identified himself only as Sahadullah, said he was one of seven attackers inside the hotel.
"Release all the mujahideens, and Muslims living in India should not be troubled," he said.
The central bank closed the bond and foreign exchange markets but said it would continue auctions to keep cash flowing through interbank lending markets, which seized up after the global financial crisis destroyed Wall Street banks in September.
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.
Foreigners have already been heavy sellers of Indian assets and a steep fall in the Indian rupee was now feared.
Nerves were already clearly rattled. Credit default swaps, insurance-like contracts on the State Bank of India's five-year bonds, widened 15 basis points to 435 basis points.
Trade Minister Kamal Nath described the attacks as "an unfortunate event" but said he did not expect they would slow investment.
The attacks could be another blow for the Congress Party-led government ahead of a general election due by early 2009.
The government has suffered a string of state election losses in the last year. The main Hindu-nationalist Bharatiya Janata Party, which has done well in state polls, has criticised the government for being soft on terrorism after a series of bomb attacks in Indian cities this year.
Strategic expert Uday Bhaskar said the attacks had grave implications for India on many levels.
"The fact that they were trying to segregate British and American passport holders definitely suggests Islamist fervour," Bhaskar said.
Small groups of militants armed with automatic weapons and grenades burst into the luxury hotels, a hospital and a railway station late on Wednesday, as well as a famous cafe popular with foreign tourists, firing indiscriminately and tossing grenades.
"There are many people trapped inside the two hotels it seems, and we are hearing reports of constant gunfire, mostly from the Taj hotel," a duty officer at the Mumbai police control room said.
The attackers appeared to target British and Americans as they sought hostages. Police said an Israeli rabbi and his
family were being held hostage in a Mumbai apartment. Witnesses said the attackers were young South Asian men 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 were seen evacuating wounded on luggage trolleys, with passers-by covered in blood after they rushed to help. Some clambered down ladders to safety.
Other distressed guests stood at hotel windows, although a slow trickle could later be seen leaving the Taj hotel through a back gate, surrounded by heavily armed troops and police.
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.
Gunmen, Police killed
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.
As dawn broke on the red, white and grey brick facade of the Taj on Mumbai's waterfront, the hotel was surrounded by armed police, ambulances and fire engines.
At least two guests, trapped in their rooms in the Taj, phoned TV stations. One said the firedoors were locked, 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.
Rakesh Patel, a British witness who was staying at the Taj Mahal hotel on business, said the attackers were looking for British and U.S. 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. Australia said two of its nationals had been injured but the toll could rise.
In Washington, the White House and President-elect Barack Obama condemned the attacks, as did France, current president of the European Union, and U.N. Secretary General Ban Ki-moon.
Bruce McIndoe, a travel security expert and President of iJET Intelligent Risk Systems, a private intelligence firm,
said he had already advised his corporate clients to postpone travel to Mumbai, and warned there would be "ripple effects".