Indian Prime Minister Manmohan Singh suggests the group behind the Mumbai terrorist attacks is based outside the country as police battle to release hostages the day after more than 100 people were killed.

A standoff continued at the Oberoi Hotel, where about 100 members of a specialized unit of the Indian police undertook an operation to rescue four to five foreigners hostage on the 19th floor.

CNN producer Phil O'Sullivan reported a "very loud explosion came from right deep in the hotel" and a lot of shooting.

At the nearby Taj Mahal hotel, CNN's Sara Sidner reported another blast had rocked the building and flames could be seen.

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Medics took stretchers into the hotel and brought out bodies. Police were going floor to floor to flush out gunmen. About five of them were believed to be holed up in the Taj; another three in Oberoi, officials said.

Maharashtra official Bhushan Gagrani said the Taj situation was "almost sorted out" and that police expected to clear the Oberoi by tonight. Hostages remained, but he didn't say how many. Read more from witnesses

Meanwhile, Singh suggested the group behind the attacks was based outside India and probably had "external linkages."

"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 financial capital of the country," he said.

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