Israel: rescue operation badly planned | Graphic: how terror spread | They came to kill and maim | Survivors' tales | Analysis: Bronwen Maddox | Andreas Liveras shot dead | The specialist in 'encounter killings' | Was al-Qaeda was pulling the strings? | Opinion: Maria Misra | Leading article: Massacre in Bombay | Markets: India's shares dive

Updated at 18.53 GMT (00.23 Bombay)

Indian special forces fired grenades through the windows of a luxury Bombay hotel tonight against one or more Islamist gunmen determined to fight to the death.

Some 48 hours after launching co-ordinated attacks on the country's commercial capital rumours persisted that at least one of the terrorists involved in Wednesday's attacks was a Briton of Pakistani origin.

The Foreign Office said that Indian authorities had confirmed that there was "no evidence that anyone, either of those shot or those in custody, was British".

Today, at the Jewish cultural centre where a group of militants had been holed-up, there were premature celebrations when a group of commandos walked out with their rifles in the air after ending their siege of the building. It soon emerged that the five hostages held inside the centre had all been killed during the course of a day-long assault.

The Brooklyn-based Chabad-Lubavitch organisation confirmed that among the dead was Rabbi Gavriel Holtzberg and his wife Rivka, who ran the ultra-Orthodox group's outreach centre in Bombay. The couple's two-year-old son, Moshe, was smuggled out of the building last night and is now with his grandparents.

An Israeli rescue service which had sent a mission to help with the siege at the Chavad Lubavitch centre said that it thought all the hostages had been killed. "Apparently the hostages did not remain alive," the Zaka service said in a brief statement. The mission of the Zaka volunteers is to rescue the living or gather up all collectable pieces of flesh and blood so that the dead can be properly buried.

The Israelis' deaths brought the total number of foreigners known to have killed to 18, including three Germans, two Americans and two French nationals. One Japanese, a Canadian, an Australian, an Italian and a Singaporean also died and at least five other Israelis are missing.

The only known Briton confirmed dead was Andreas Liveras, a 73-year-old yachting tycoon shot dead in the Taj Mahal Palace hotel on Wednesday night.

The Chief Minister of Maharashtra state, Vilasrao Deshmukh, was quoted as saying today that two British-born Pakistanis were among eight gunmen arrested by Indian authorities.

Both Gordon Brown and David Miliband, the Foreign Secretary, played down the claim, although said they could not rule it out. The Foreign Office said tonight that Indian officials were now denying that Mr Desmukh had ever made the remark.

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