Indian stock exchanges were ordered closed as soldiers and local police were attempting to root out terrorists who were reported holding at least 15 hostages, some of them in a hotel building near the Indian Stock Exchange.
"The stock market and exchanges are closed for the day. The expiry in [November] futures and options and the settlement [due on Thursday], has been postponed to the next working day," said Kalyan Bose, a spokesman for the Bombay Stock Exchange.
Gunfire erupted Thursday morning after the Army moved into Mumbai to assist police in quelling the terrorists who had attacked in India's financial capital, including two luxury hotels and the city's busiest commuter railway station, according to reports.
The terrorists were believed to be holding seven foreigners at the Taj Mahal Hotel in upscale southern Mumbai, less than a mile from the Bombay Stock Exchange building.
A shadowy group calling itself Deccan Mujahideen reportedly claimed responsibility for the attacks, which reportedly targeted Westerners, particularly Americans aside and Britons.
"It is a very serious situation and gun battles are still on in at least three places," said Vilasrao Deshmukh, chief minister of Maharashtra state, of which Mumbai is the capital, according to the Website of CNN-IBN news channel.
The report added that 11 police officers, including the head of the Anti-Terrorism Squad, were among the 87 people killed in the synchronized attacks.
The coordinated attacks began about 10:30 p.m. local time, according to media reports.
CNN reported that a group calling itself Deccan Mujahideen claimed responsibility for the attacks, though analysts told CNN "that may be a front name to throw investigators off."
Earlier, CNN reported that gunmen were holed up in the city's swank Taj Mahal and Oberoi hotels and were locked in gun battles with local police.
The military reportedly entered the Oberoi, and a large explosion was heard shortly after, according to CNN. Local police have killed four of the suspected attackers and captured nine, the Associated Press reported, citing Indian officials.
Some 15 foreign hostages were being held at the Taj Mahal, the online edition of The Wall Street Journal reported. Half of them had U.S. or British passports, according to CNN. In addition, a hostage situation was "unfolding" at Cama Hospital, CNN reported.
Three foreigners, including a Belgian and an Indonesian, also were taken hostage at the Trident hotel, which is connected to the Oberoi, the Journal reported, citing local media.
There were five shootouts and two grenade attacks, according to the news network's report, CNN said. The attacks were concentrated in the upscale Colaba district in the southern end of the city, the Journal reported. The Taj Mahal hotel and Oberoi hotel are a short distance from each other at the southern tip of the city.
According to the Web site of CNN-IBN, an English-language Indian TV news channel, rescue operations were under way and "several" hostages were rescued.
Evacuations
The attacks appear to be centered on locations popular with foreign visitors, while most of the injured were police officers. One attacker was believed to be holed up in the railway station, where thousands have been evacuated.
An online report in the Journal quoted Mumbai police commissioner A.N. Roy as saying the police are treating the attackers as terrorists who "opened fire indiscriminately."
The Journal, citing Times Now television, reported that two gunmen who entered the Taj hotel were seeking guests with British or American passports.
In addition, gunshots were fired at the Leopold Restaurant, which is popular with foreign visitors, according to reports.
Mumbai was the site of a large-scale terrorist attack in 2006, when seven bomb blasts rocked the suburban railway, killing 200 people.
The city, formerly known as Bombay, is home to the Reserve Bank of India, the Bombay Stock Exchange and the National Stock Exchange of India. It's also home to the "Bollywood" film industry, a major seaport and the regional offices of numerous multinational corporations.
President George W. Bush condemned the attacks, a White House spokesman said Wednesday, according to the Associated Press. President-elect Barack Obama, who's being updated on the events as well, did the same, a national-security representative from his transition team told CNN.
A State Department spokesman said he was unaware of any American casualties, the AP reported.
Wednesday's attacks came after a series of similar incidents attributed to Islamist terrorists in other cities in India, including New Delhi.
India, which is predominately Hindu, was partitioned in 1947, creating neighboring Pakistan, which is predominately Muslim. The countries have a history of tension and cross-border violence.
'You don't feel safe'
Nick Chamie, head of emerging markets research at RBC Capital Markets, said that although India is somewhat accustomed to attacks, any rise in political instability could further weigh on its market and economy.
"Generally, politics have never been a factor of strength for India. But that would add to the headwinds that the Indian market and the economy will face, that's for sure," Chamie added. "With the elections not due until next year, there's already some degree of paralysis about the economy right now."
India's sensitive index, or Sensex, rallied Wednesday, gaining 3.8% to 9,026.72. But the benchmark has lost about half its value so far this year, as investors have pulled their money out of emerging markets around the globe.
Rob Lutts, the chief investment officer of Cabot Money Management, a Salem, Mass.-based independent wealth-management firm, said that to get money flowing back to India, investors need to feel the country is a safe place to invest. A spate of terror attacks show that it is not.
"Security is lacking, infrastructure is lacking," Lutts said. "The way to monitor and prevent these [attacks] is not there."
To be sure, Lutts said the market's reaction to the latest round of attacks will likely be limited. As the global credit crisis and economic downturn takes its toll on emerging markets, negative developments to some degree are already priced into current levels.
"When bad news occurs when valuations are already so low, it doesn't have much of an impact," he said.
In the longer term, India needs to improve conditions for capital investment to expand wealth and inspire more confidence in projects in the country, he said, adding that "I do believe that will happen over time" as the global recession wanes.
But for now, he commented, "You don't feel safe there and your capital doesn't feel safe, either."
