Indian soldiers stormed the last hideouts of Islamist militants in Mumbai this morning as the bloody confrontations that have left at least 120 dead and hundreds injured moved into their second day, according to

Masked Indian commandos stormed the Jewish centre where Islamist gunmen were still holding hostages. Soldiers, dropped onto the roof by helicopter, kept up a steady stream of fire as the assault moved through the building.

The violence, which began late on Wednesday night, was still breaking out across the city this morning. Explosions were heard at the Taj Mahal hotel, despite claims from Indian army commanders last night that it had been cleared of terrorists.

Over 24 hours, gangs of heavily armed young men attacked two luxury hotels, a hospital, a popular restaurant and a railway station. Trapped by gunfire and explosions were bankers, businessmen and women, actors and members of an ultra-orthodox Jewish group - many of whom were freed by security forces.

By the early hours of the morning the mayhem had left India`s financial capital`s skyline smoking, and blood on the streets. Mumbai, a metropolis of 19 million people, had been reduced to a ghost town - with many international firms cancelling travel and closing offices.

World leaders were quick to condemn the attacks. The chorus was led by the US president-elect, Barack Obama, who vowed the US would work with "India and nations around the world to root out and destroy terrorist networks".

Recently improved relations between Pakistan and India were coming under strain after the Indian prime minister pointed the finger of blame at "external forces".

Two Scotland Yard officers were on their way to Mumbai to help the authorities.

It was clear that foreign targets, especially those from the US and UK, had been singled out. One of the first targets was the Cafe Leopold, a famous hangout popular with foreign tourists.

The attackers also picked off British and US citizens in the luxury hotels. Television pictures showed how bloody and brazen the attackers were: two men were shown shooting at random as they drove through streets in a stolen police jeep.

Late last night it appeared that the sieges at the Taj Mahal and Oberoi hotels were coming to a close as dozens of hostages made it out into empty Mumbai streets.

Many hotel guests simply barricaded themselves into their rooms and hoped for the best. Yasmin Wong, a CNN employee who was staying in the Taj, told the news network that she hid under her bed for several hours after she was awoken by gunfire. She said she received a phone call from the hotel telling her to turn her light off, put a wet towel by the door and stay in her room until she was told otherwise.

The Foreign Office confirmed that one Briton, 73-year-old Andreas Liveras, had died in the attack. A shipping tycoon, he was shot dead apparently moments after speaking to the BBC from a basement.

An Australian, a Japanese woman, an Italian and a German also died. In the wake of the attacks, the US, Britain and Australia have advised their citizens to defer travel to Mumbai until further notice. But the majority of those killed were ordinary Indians as they boarded trains and ate meals. At least 315 people were injured.

India`s prime minister, Manmohan Singh, blamed militants based in India`s neighbours, a reference to Pakistan, raising fears that the peace process between the two nuclear rivals would stall.

"It is evident that the group which carried out these attacks, based outside the country, had come with single-minded determination to create havoc in the commercial capital of the country," he said in a televised address. 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."

Pakistan`s president, Asif Ali Zardari, condemned the attack as "detestable". However, Indian authorities claimed that the evidence of Pakistan`s involvement was building. There were early allegations that one militant was from Pakistan. The Indian navy also intercepted two Pakistani merchant vessels off the coast of Gujarat. It is believed that some of the terrorists arrived in Mumbai on Wednesday night by boat, and the navy was last night searching for the ship that dropped them there.

Mumbai is no stranger to terrorism: two years ago 187 people died in synchronised bomb attacks on the city`s rail system.