The bomb, estimated to have an explosive force of seven kilograms of TNT, went off in the busy central marketplace next to stands selling potatoes, the Interfax news agency quoted officials as saying.

The blast blew a crater in the asphalt, ripped a hole in an adjacent market hall and turned the marketplace into a scene of devastation.

Vladikavkas is the capital of the semi-autonomous region of North Ossetia, adjacent to the breakaway republic of Chechnya. The town is also one of the most important Russian military bases in the northern Caucasus.

A spokesman for the North Ossetian security authority said: ``Many people are dead. We do not know exactly how many.''

Russia Interior Minister Sergei Stepashin has been instructed by President Boris Yeltsin to fly to Vladikavkas and take charge of an investigation.The Russian domestic secret service FSB was also asked to join the probe.

Yeltsin sent a message to North Ossetia President Alexander Dzassokov saying he was ``deeply shocked by this barbarous act. I regard it as an attempt to destabilise the situation in northern Caucasus.''

So far no individual or group has claimed responsibility for the blast. The entire region is a hotbed of both political and criminal rivalry and the blast could have been the result of either.

Local police said the bloodbath was not an act of revenge by gangsters, saying it was ``too sadistic''. Instead, they suspected ``masterminds outside'' North Ossetia were behind the attack. They did not elaborate.