MUMBAI, Nov 26: Heavy exchanges of gunfire were taking place at around 2 this morning between police and terrorists, who were holed up in two luxury hotels in south Mumbai, after the worst terrorist attack in India had seen at least 80 people killed and over 150 injured.

The army was called out as terror attacks swept through the city late at night, with a third 5-star hotel in a suburb also having came under attack. Police claimed to have killed two terrorists, even as a police vehicle was hijacked by the attackers.

The terrorists opened fire at nearly half a dozen places in south Mumbai at around 10pm on Wednesday, and soon took hundreds, including foreigners and businessmen, hostage. Gunmen opened fire from AK-47 rifles at the city’s busiest railway terminal, CST, killing nearly 20 people.

Fear swept through the city, as frequent gunfire was heard from public places. Explosive-laden vehicles, including a taxi near the international airport, blew up. The authorities decided to call in the army early this morning and sought additional commandos from Delhi.

Terrorists took hundreds hostage in the Taj Mahal and Oberoi hotels in south Mumbai, minutes after they had fired with their AK-47 rifles. They threw hand-grenades at the Oberoi hotel, setting two floors aflame.

Commandos tried unsuccessfully to enter the two hotels for at least three hours. At around 1am, a fierce gun-battle broke out at the historic Taj hotel outside the Gateway of India, and flames could be seen leaping out of the dome.

The terrorists also entered a hospital and fired at patients and police. Later, they hijacked a police vehicle and disappeared into the night.

Police were clueless about the number of terrorists, their identity or their background. The surprise attack took the city of 15 million by surprise, with gunshots being heard in the tourist district of Colaba at around 10 pm.

Soon the city streets were deserted as policemen with bullet-proof vests took over south Mumbai. All roads were sealed to prevent the terrorists from escaping.

Eyewitnesses at the two hotels and at the CST railway station said the terrorists were firing indiscriminately. At the busy railway terminus, scores of passengers fell victim to the bullets. Even after midnight, the blood-stained platforms were uncleared and injured passengers could be seen lying there.

Police warned residents to stay at home as more attacks are feared.

Agencies add: Indian TV channels reported that the chief of Mumbai’s police anti-terrorist squad, Hemant Karkare, was among those killed.

Attackers also targeted the Cafe Leopold, a famous restaurant and hang-out for tourists in Mumbai. “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.”

Maharashtra state chief minister Vilasrao Deshmukh said that an encounter was going on at the two hotels and the situation was grave. “Our men are on the job,” he added.

Maharashtra police chief A.N. Roy said: “These are terrorist strikes in at least seven places.”

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, who was with friends at the Cafe Leopold when gunmen opened fire around 9:30pm, had suffered injuries.

“Fifty-eight bodies have been brought in. There are another 50 who are injured, some critical, who have been transferred to the nearby J.J. Hospital,” a spokesman for the city’s St George’s Hospital said.

Indian Prime Minister Manmohan Singh condemned the attacks and said the Maharashtra state government would be given all the assistance required.

The head of the Madrid regional government, Esperanza Aguirre, was staying in the Taj hotel at the time of attack but she and her delegation escaped unhurt, a government spokesman in Madrid said.

The BBC News website said a British member of the European Parliament, Sajjad Karim, was also in the hotel at the time and saw a gunman open fire in the lobby.

“All I saw was one man on foot carrying a machine gun-type of weapon -- which I then saw him firing from and I saw people hitting the floor, people right next to me,” he was quoted as saying.

One British guest told local Indian television that he had been among a dozen people herded together by two heavily armed men and taken up to the hotel’s upper floors.

“They were very young, like boys really, wearing jeans and T-shirts,” the guest said.

“They said they wanted anyone with British and American passports and then they took us up the stairs. I think they wanted to take us to the roof,” he said, adding that he and another hostage had managed to escape when they reached the 18th floor.As he was speaking, there was a loud explosion from the roof of the hotel.

It was not immediately clear if some hostages were still being held.

British Foreign Secretary David Miliband “unreservedly” condemned the attacks, saying they were yet another reminder “of the threat we face from violent extremists.”