India markets crash dashes middle class dreams

By Bappa Majumdar and Biman Mukherji

NEW DELHI (Reuters) - Sunil Kapadia would regularly borrow from banks to invest in India's stock markets, seeing them as a one-way ticket up the middle-class ladder as the economy hummed along at near double-digit growth rates.

But his dream of easy riches lay wrecked as the country's main stock index tumbled to three-year lows last month, taking its losses in 2008 to more than 50 percent, forcing him to move his family to a cramped suburban apartment.

"In the quest for jam, I have lost my bread and butter," said 48-year-old Mumbai resident Kapadia, who lost 20 million rupees ($400,000) in share trading this year.

Thousands of small investors were lured into booming stock and commodity markets as the economy soared along at growth rates of 9 percent or higher in the past three fiscal years and the government spoke of lifting the increases into double digits.

Now, with the vicious collapse of the market, their savings are lost and they are unable and unwilling to invest again.

The crash has also hit commodities, with prices of goods from edible oils to metals dropping by 40 to 50 percent over the past four to five months.

It is a hard blow to the confidence of India's aspiring middle classes, and their curtailed spending has also unsettled the foreign firms and investors who were queuing up to do business in the $1 trillion economy.

"At the moment, investors are scared of their own shadows, and it will take some time for them to be back," said Vikram Bhatt, head of brokerage firm Ajmera Associates Ltd of Mumbai.