As the news of Lehman Brothers' bankruptcy and the $50-billion sale of Merrill Lynch to Bank of America spread like wild fire across boardrooms and corporate offices, the mood of Indian businessmen turned from serious to grim.

Over two dozen businessmen and CEOs told Business Standard that the latest crisis will crimp global capital flows further, leaving little hope for the Indian stock markets to recover in the near future. In other words, while they may continue to deliver good results, the shareholders are unlikely to make gains in the stock markets.

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"A month ago, we had thought the worst was over," said Jubilant Organosys [Get Quote] co-chairman Hari S Bhartia. Added Avantha Group Chairman Gautam Thapar, "We have to see how the liquidation (of the financial behemoths) takes place. Good securities will be bought at a deep discount."

Over three-fourths of the respondents said things could get worse and there could be more pain in six months from now. "We still have a long way to go. Only a third of the $1.3 trillion (bad debts) has been written off. There is some more trouble ahead," said Novartis India [Get Quote] vice-chairman Ranjit Shahani.

"The bankruptcy filings in the US will force Indian banks to tighten the prudential lending norms, making it difficult to obtain credit," said Eicher Motors [Get Quote] CFO Vinod Aggarwal. Asahi India Glass [Get Quote] CEO Sanjay Labroo agreed saying, "The recent happenings in US banks only reinforces the pessimistic view that it's not just a $500-billion write-off. It's more than that."

All of them said raising funds abroad will become more tough, while domestic interest rates will stay high until the next elections as the government's main target is to keep inflation under check till then. The head of a large private equity fund said raising money for India was no longer easy. Already grappling with high interest rates of 14-15 per cent, small businessmen feared the worst.

Automobile manufacturers said growth could fall sharply in the days to come. "Should the cost and availability of finance remain as they are, the-two wheeler industry - which witnessed growth rates of 15 per cent in the past - could reduce to less than 5 per cent," said TVS Motor Company [Get Quote] Chairman and Managing Director Venu Srinivasan.

Cement and steel makers fear profit margins in the current and subsequent quarters are bound to take a hit with the rising cost of capital and the fall in commodity prices. Both the sectors are apprehensive of a slowdown in housing, which is likely to dampen the demand for their products.

Some businessmen said overseas acquisitions could now become more difficult, though valuations are down because all deals will have to be settled in cash, which is hard to come by. "Valuations will turn more realistic, but financing will become more difficult," said Dr Reddy's Laboratories vice-chairman and CEO GV Prasad.

"The bankruptcy will have an impact on mergers and acquisitions, but I think these firms will get back to action more or less in time when the market also becomes stable," added Essar chairman Shashi Ruia.

Exporters said orders could be cut with the onset of the recession in the US and Europe. "The impending recession that has been forecast in the UK, Japan and Germany will dampen demand for Indian exports to these markets. The kind of growth that we have seen in the auto component industry of around 20 per cent annually will fall to between 10 per cent and 15 per cent," said Amtek Auto [Get Quote] chairman Arvind Dham.

Retailers said consumer sentiment could take a severe hit. According to Future Group chairman Kishore Biyani, consumers have come to realise that they do not have unlimited capital to spend. "Growth will be possible only if we relook our strategy and come out with a low-cost business model," he said.

Privately, almost all expect their anguish at Western financial institutions for causing the present crisis. "The financial sector turmoil is because of indiscriminate, immature and relentless lending. The past is catching up with them," said Landmark Land Holdings chairman Gaurav Dalmia. The future definitely looks tense.

• US sub prime crisis spooks global economy: Complete coverage