A previously unknown group calling itself the Deccan Mujahideen has claimed responsibility, but correspondents say this could be a hoax or an assumed name for another group.
On Thursday, police placed snipers on the rooftops of surrounding buildings and there were reports of continuing exchanges of fire.
As the commandos combed through the hotels, people on the street looked on.
Meanwhile, relatives of victims of the attacks grieved as they waited to pick up bodies from a hospital.
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