Indian soldiers stormed the last hideouts of Islamist militants in Mumbai today after a day of bloody confrontation that left 120 dead, hundreds injured and the country’s prime minister pointing the finger of blame at “external forces”.

Over 24 hours, gangs of heavily armed young men had 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 the city’s skyline smoking, and blood on the streets of India’s financial capital.

Mumbai, a bustling metropolis of 19 million people, had been reduced to a ghost town – with many international firms cancelling travel and closing down offices.

World leaders were quick to condemn the attacks. The chorus was led by President-elect Barack Obama, who vowed that the United States would work with “India and nations around the world to root out and destroy terrorist networks”.

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 American citizens in the luxury hotels.

Television pictures showed how bloody and brazen the attackers had been: two men were shown shooting at random as they drove through nearby streets in a stolen police jeep.

Late tonight it appeared that the sieges at two of the city’s landmark hotels, the Taj Mahal and the Trident, were coming to a close as dozens of hostages made it out into empty Mumbai streets.

Less than a kilometre away commandos moved in to free families trapped in a Jewish centre taken over by gunmen, although it remained unclear whether that operation had been successful.

Many hotel guests had 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, died in the attack.

A shipping tycoon, he was shot dead apparently moments after he had given an interview to the BBC from a basement.

An Australian, a Japanese woman, an Italian and a German had also died. In the wake of the attacks, the US, Britain and Australia have advised their citizens to defer travel to India’s commercial capital until further notice.

But the overwhelming majority of those killed were ordinary Indians as they boarded trains and ate meals. At least 315 people were injured.

The Indian prime minister, Manmohan Singh, blamed militant groups based in India’s neighbours, a pointed 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, also condemned the attack as “detestable”.

However, Indian authorities claimed that the evidence of Pakistan’s involvement is building.

There were early allegations that one of the militants was from Pakistan.

The Indian navy also intercepted two Pakistani merchant vessels off the coast of the neighbouring state of Gujarat.

It is believed that some of the terrorists had arrived in Mumbai on Wednesday night by boat and the navy was last night continuing its search for the “mother ship” that dropped them there.

Mumbai is no stranger to bloody outrages: two years ago 187 people lost their lives in a series of synchronised bomb attacks on the city’s railway system. — Guardian