Share fall stuns Indian investors

By Karishma Vaswani India business correspondent, BBC News, Mumbai

Investors are anxiously watch stock movements

It's been a difficult week for the Indian stock markets.

Volatility was the order of the day as investors scrambled to make sense of why shares were reacting so badly to dismal news out of the US.

Now everyone wondering whether all this volatility on the markets an omen of bad times ahead for India's economy.

Arguments break out periodically, but the topic is always the same: what's behind the crash on the Indian stock market?

Losing money

Zakir Sheikh has been an investor here for years.

He is watching as he looks up at the big screen outside the Bombay Stock Exchange where his shares are falling in value.

Nobody knows whether the bubble has finally burst

He thinks the blame lies squarely on the US.

"Everyone always said that we wouldn't be affected by the slowdown in the United States, that India is strong enough to withstand any problems elsewhere," he says.

"But that's not true: the US stock market has been hit, but we've been hit worse. We've lost some 20% in the last few months. It doesn't make sense."

Zakir's bewilderment is understandable.

India's stock markets saw spectacular returns last year, with a rise of 47%.

But in the last few months, $800m has been wiped off the Bombay Stock Exchange, as foreign funds pulled their money out of stock markets around the world.

Pessimism

But the pessimism amongst investors outside the Bombay Stock Exchange is not being mirrored by Indian businesses.

At a meeting of small and medium sized businesses at the Indian Merchants Chamber there was a surprising mood of optimism among business owners.

Hareesh Tibrewala runs a glue and adhesive manufacturing business in Mumbai.

His company is worth some $50m and has seen 30% growth per year.

Although his business does sell some goods overseas, he says profits are not being hit by a slowdown in the US market.

"Twenty years ago, there's no denying, we would have been badly hit by a slowdown in the US economy," says Mr Tibrewala.

"But now, even if the US, Europe, and Japan all slow down, we will be OK.

"We have a very strong domestic market, and we have lots of young people who want to spend money, so we will be able to weather any storm."

Small savers

But those words may ring hollow for Zakir's mother, Momi Sheikh.

Her monthly budget has been directly hit by her son's losses at the stock market.

The price of foodstuffs, such as onions, has risen sharply

And all of this coming at a time when prices of daily goods are rising fast.

While shopping at her local vegetable market, she explains how frustrated she is with the growing problems in the economy.

She worries that there is little that common folk like herself can do to protect themselves against bad times ahead.

"Every day the prices of onions, vegetables, rice, oil are rising, and my son's income is going down," she says while looking through a basket of tomatoes.

"What do we do? How do simple people like us survive when our monthly expenses are more than our monthly income?"

Similar anger and frustration is reflected among the poor across India.

From farmers committing suicide in Vidharba to traders rioting in Uttar Pradesh, resentment against rising prices is spreading across the country.

Keeping economic growth intact is crucial for those at the bottom of India's economic ladder.

More people have been lifted out of poverty in the last decade than at any other time in India's history, thanks to strong growth.

Any hint of a slowdown could have a severe impact on the fortunes of millions of people across the country.