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Its weird but some of the domains are getting redirected to localhost (127.0.0.1). I cant figure out the reason.

I tried checking the hosts file and everything is perfect there, other than that I cant think of anything that might cause such a problem system-wide. by system-wide I mean the sites are getting redirected for every browser or utility which tries to connect to it, Google Chrome, Opera, Firefox, wget, curl everything. even the ping request is resolving it to 127.0.0.1, traceroute and every possible way I could think of, everything just drop to localhost.

I am quite sure that there is no dns spoofer on my network, I am on a PPP connection.

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try something like dig <website-with-problems>, that will tell you which DNS is resolving your requests and what it is returning. That may provide some clues. –  roadmr Feb 22 '13 at 20:24
    
apparently, there is a local DNS listening on port 53 on my system. I tried to remove that and now I cant use the dig command as well. problem still persists. –  Gufran Feb 22 '13 at 20:57
    
Try running sudo netstat -plnt to see which program is listening on that port. –  Axel Feb 22 '13 at 21:54
    
dnsmasq is listening on port 53, there is no other detail however. –  Gufran Feb 23 '13 at 12:03
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