By Karishma Vaswani
Business correspondent, BBC News, Mumbai
Falling share prices may be a sign of things to come in the real economy
"India will not be affected by the global credit crunch, the economy here is stable and sound."
Those words, parroted so often over the last few months by Indian politicians and financial officials, may now ring a little hollow.
The truth of the matter is, India has been affected by the liquidity crunch - though arguably not as badly as other parts of the world have been. At least not yet.
But the downturn in the West now appears to have reached India's shores.
The Indian stock market is the most obvious and evident victim of the global credit crunch - having lost more than half of its value since the crisis began.
That is because billions of dollars of foreign funds were pulled out of Indian shares, as foreign fund managers scrambled to get their books in order.
Concerns are growing here about a global recession and what that might mean for the 300 million strong Indian middle classes.
Many Indian professionals have put their savings into the stock market and into mutual funds over the last few years, tempted by the spectacular returns they saw.
One such investor is Sony Bhatia, 34, a software developer.
Outside the Bombay Stock Exchange, staring up at the big flashing screens outside the stock market, he is dismayed by the plethora of red arrows pointing down.
"How could this happen?" he asks.
"Just three months ago I put in a huge amount of money. Everyone said 'this is the bottom - now the markets can only go up'. Now I've lost over half of that."
It is not just in the Indian stock markets that people here are feeling the effects of the global credit crunch.
Investors have seen the value of their shares plunge
The property sector has also been bruised.
Until recently, property prices in Mumbai were on par with Manhattan's, boosted by scores of foreign firms coming into the financial capital, looking to set up shop here.
That foreign money also helped to create hundreds of thousands of jobs for India's young middle classes, who could now finally afford to realise their dream of owning their own home.
All that demand for flats and houses caused prices to soar 40% in some of the big cities in India last year.
But now much of that money and demand has evaporated - leaving property developers out in the cold.
Already prices are down some 10-15%, with forecasts of a bigger crash around the corner.
Real estate agent Harsh Mukri, once the envy of his friends because of the large commissions he used to make on his deals, says he is very worried.
"It's hard to get anyone to buy a house these days," he says. "No bank is willing to give loans.
"My business has completely dried up. Even renting out flats to foreign companies - a huge profit earner for us - has gone down. People aren't coming here as much as they used to."
Other businesses are also being hit by this reluctance to lend on the part of the banks, as financial institutions in India continue to hold on to their liquid funds.
"The first impact is the fear of lending", says R Balakrishnan, the executive director of Centrum Capital in a recent editorial.
"More than a credit squeeze, India is confronted with a liquidity crisis of a severe magnitude.
"The last few years of India's growth has been fuelled by foreign capital. Domestic money cannot provide the platform for growth."
The Indian financial authorities have tried to take measures to increase more liquidity in the banking system - and just a few days ago pumped in $8bn worth of funds into the markets.
But that's still not managed to raise sentiment amongst investors and consumers - which is making life tough for retailers in India.
"People aren't buying jewelry this year at the rate they were last year," says Ramesh Bherumal, a gold and diamond jewelry store owner in Mumbai's busy and crowded jewelry market Zaveri Bazar.
"Sales are down 30%, and it's the same story in other shops too - cars, electronic goods, washing machines. You name it, people have just stopped spending."
At the JMD Auto car showroom in Mumbai, the mood is similarly sombre.
Girish Vazirani has run the showroom for the last few years. He says he has never seen it so bad.
"There's no demand," he says. "People aren't interested in buying.
"The market sentiment is so bad, plus every day you're seeing bad news on television and in the newspapers. Consumers are psychologically turned off spending."
This is particularly worrying.
There had been a theory that since so much of India's economy is powered by domestic consumption, that India would largely be able to escape the global credit crunch.
But with a seismic shift in the attitude toward spending amongst Indian middle classes - there's a real fear growing here that growth rates in the future could seriously be at risk.