MUMBAI (AFP) - The Indian navy said on Friday that divers had retrieved the first two bodies of 18 crew who are feared dead on a submarine which exploded and sank earlier this week.

"Two bodies have been found and that is confirmed. A search is on for more," navy spokesman P.V.S. Satish told AFP.

The diesel-powered submarine sank in a military dockyard in Mumbai early on Wednesday, dealing a setback to India's naval ambitions just days after it unveiled its first domestically made aircraft carrier.

Navy divers have succeeded in entering the vessel, whose forward section was destroyed in the fire, and are attempting to pump out water from several sections to re-float it.

An inquiry has been set up to determine what caused an initial blast that ignited some of the weapons on board and turned the recently refurbished 16-year-old submarine into a fireball.