The fully-armed INS Sindhurakshak, returned by its original manufacturer Russia earlier this year after a major refit, went up in flames in a dock on Wednesday and sank to the bottom of the harbour.
Divers had opened the main hatch on Wednesday afternoon and were then expected to secure two water-tight compartments and begin pumping out the water to bring the vessel to the surface.
The disaster is considered the Indian navy's worst since the sinking of a frigate by a Pakistani submarine in 1971 and premier Manmohan Singh is expected to speak about it in his annual Independence Day speech Thursday.
Defence Minister AK Antony described the explosion as the "greatest tragedy in recent time".
Defence ministry spokesperson Sitanshu Kar told AFP late Wednesday: "We have not got the bodies so we can't say they are dead. But we are fearing the worst."
Navy chief DK Joshi said Wednesday no sign of life had been detected on board.
"While we hope for the best, we have to prepare for the worst," he told reporters in Mumbai, adding that there was a possibility some crew might have found air pockets but "the indicators are negative".
The blast came days after New Delhi trumpeted the launch of its first domestically-produced aircraft carrier and the start of sea trials for its first Indian-made nuclear submarine, described by Singh as a "giant stride" for the country.
The world's biggest democracy has been expanding its armed forces rapidly to upgrade its mostly Soviet-era weaponry and respond to what many in India perceive as a growing threat from regional rival China.
Amateur video footage showed a fireball in the forward section of the Sindhurakshak, where torpedoes and missiles are stored as well as the battery units.
A board of enquiry has been established to probe all possible explanations for the explosions including sabotage, but "the indicators at this point of time do not support that theory", Joshi said.
Other sailors on vessels berthed near the INS Sindhurakshak were admitted to a navy hospital in Mumbai with burns.
In February 2010 the vessel suffered a fire while docked in Visakhapatnam city in southern India, killing a 24-year-old sailor and leaving two others with burns.
The Indian navy has 15 submarines, but only between seven and nine are operational at any one time because of regular repair and refitting operations.
Joshi admitted that the loss of the Sindhurakshak had left a "dent" in the navy's capabilities.
The disaster had echoes of a tragedy in Russia in 2000 when the Kursk nuclear submarine sank in the Barents Sea with the loss of all 118 crew on board.
Russia is still the biggest military supplier to India, but relations have been strained recently by major delays and cost overruns with a refurbished aircraft carrier, the INS Vikramaditya.
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@Singh:
India had to send the 90,000 POWs home to Pakistan and got nothing in return.
Bangladesh and Pakistan have strong economic and political ties- India has bad relations with both countries.
I am afraid the 194 sailors on that torpedoed ship (Khukri) will never return.
Nor will the 1,700 soldiers that India lost in Kargil.
Nor it seems will the sailors in your submarine.
Bad luck.
@Adnan: And still 90K soldier surrender in one day. No need to check wiki. even you know it.
Let it be remembered: PNS Hangor, a Daphne class submarine of the Pakistan Navy sank INS Khukri an Indian naval frigate on the night of 8th/9th December 1971 off Bombay, inflicting the loss of all 194 Indian sailors on board:
http://en.wikipedia.org/wiki/PNSHangor(S131)
@ Sanity. After failure in finding anything in investigation they will blame this on pakistan.
Hasn't been blamed on Pakistan yet?
Of the 12 operational diesel-powered submarines of India, Sindhurakshak was said to be the best of all due to recent internal upgrades to it. This disaster really puts a dent to Indian Navy's capabilities to a certain extent. It does not however has a "significant" impact on defense capabilities of the Navy, but yes it still is a major loss. Not only of a submarine, but also of as many as 18 crew members, including 3 officers.