While India 's financial markets have shown some resilience to the credit crunch emanating from the US, they still face problems of their own, says Deepak Lalwani, Director- India at Astaire & Partners.

"The Indian economy is clearly slowing but rising interest rates, high inflation not yet seen as peaking and a depreciating currency makes it impossible to cut interest rates to stimulate demand," he says.

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"Furthermore, domestic political woes and possible future tensions with Pakistan following the political vacuum there have also dented risk appetite among overseas investors."

Mr Lalwani says foreign institutional investors, who bought a record $17bn of Indian equities last year, have reversed the trend by selling $7bn so far in 2008.

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He points out that bear markets in India over the last 17 years - since markets were liberalised in 1991 - have lasted on average 15 months.

The bottom usually comes when the price/earnings ratio touches 10 times, which was last seen in May 2003.

"This would equate - barring earnings downgrades which are possible with second-quarter results due in October - to roughly 10,000 on the BSE Sensex index. The index currently stands at just above 14,000 and trades on a P/E of 14 times - below the 15-year average of about 16 times.