Among those taken to hospital were a 23-month-old baby with "a nail in his head" and a woman with a nail in her stomach. Five people - three men and two women aged between 33 to 62 - were last night admitted to King's College Hospital for treatment, four of them in a "serious condition".
In total, 17 people were taken to the hospital, which is the specialist head injury centre for south London.
Shoppers described how people were lying in the street "with part of their faces blown off" and how others had lost fingers.
"Clearly the person who set this off is disturbed," said Commander Hugh Orde, the officer leading the police inquiry. The motive for the attack was unclear and no warning was received, he added. But Scotland Yard appeared to rule out the involvement of Irish paramilitary groups.
The Home Secretary, Jack Straw, immediately condemned the attack. "This is an outrageous and mindless act," he said. "Our sympathies go out to those injured."
The bomb had been placed in a blue sports bag which had been picked up by market traders and passed around to find out who it belonged to. George Jones, 42, said: "A holdall was handed to me by somebody who said someone had forgotten their shopping. I unzipped it and opened it wide and I could see what it was."
It was a square device with sticky tape and nails. "I picked it up and put it by a brick wall to stop people getting hurt. Then it went off. I was blown across the road and a couple of nails lodged in my leg and I was hit by concrete and glass."
The explosion was behind the Iceland store at the junction of Electric Avenue and Brixton Road, near the entrance to Brixton market. Police received the first reports of the explosion at 5.26pm. Central Brixton was cordoned off after the blast, which many people at first mistook for a violent thunderclap, and the area evacuated.
Calvin Smith, a Brixton resident, said he heard the explosion just as he came out of the Tube station. "People were screaming and shouting. They started running away from the scene. I looked around and saw two men lying in the road who couldn't get up. There was blood running down the road. One guy had a whole side of his face missing and I saw other people running along with fingers blown off. They were hysterical."
Another local resident, Jools Thomas, said: "It was quite horrifying - there was a flash and then this sonic boom which vibrated everything and then the smoke started billowing out from near the market.
"There was a bloke with a nail stuck in his head and another with a nail in his lung. Who could put a nail bomb there, where there is all those people just doing their shopping?"
Traffic in the area came to a standstill while helicopters hovered overhead as police conducted inquiries.
Former Army officer Neall Whatley, 36, was on the scene immediately afterwards. He tried to comfort a young girl who had been hit by a nail. Mr Whatley, who said he was experienced in anti-terrorist work, dashed from the Ritzy Cinema to the packed shopping area of Electric Avenue. "It was carnage. There was one young child with a nail sticking out of her cheek."
In the seconds after the explosion, "people were running in all directions," he said. "I administered first aid to two people. One was a small child and the other was a security guard from Iceland who had severe chest and leg injuries. The small child I would say was about seven. She was just very, very shocked."
Robert Davidson, 42, from Brixton, was nearby when the blast occurred. "I heard a bang and then I saw a lady lying on the floor with cuts on her legs." Metin Saglam, 34, who runs a fast-food shop on Brixton Road said: "I heard two bangs and there were people running around screaming `Bomb, bomb, bomb' and there was a man lying on the floor."Reuse content