The change of mood is dramatic. The stock market seeks lower levels every day, and the same people who thought a month ago that a Sensex level of 12,000 was stretched but not unreasonable, now argue that the market will settle at or near 8,000.

Everyone expects interest rates to go up, in part because of the signals from the United States, and the effect will be to cool bank lending - which means slower growth in both consumption and investment.

Then, there is growing concern over the country's trade and current account deficits, especially since oil prices show no signs of softening from their current levels. This, coupled with the pulling out of money by foreign institutional investors, translates into pressure on the rupee - which has already fallen against a soft dollar and could fall further.

And while inflation is still quite low, it will climb now that petrol and diesel prices have been hiked. In short, whether it is the market for stocks, debt or currency, expectations have changed. Added to that are the macro-economic concerns about oil prices, inflation and the trade deficit.

That's not all. It turns out that more than half the companies saw a drop in profits last year (as reported by this newspaper yesterday), a disconcerting fact that was masked by the superb performance of the corporate giants, so the upbeat corporate story doesn't look quite so generalised any more.

As if to underline that point, some sectors are beginning to play to a new tune. The change of mood has already had knock-on effects in real estate (where prices have flattened, if not fallen), and in the public offer of shares, as some companies are postponing plans.

Sitting oddly on this pile of bad news and worse expectations is the evidence of new global confidence in "the India story". IBM's announcement of $6 billion worth of investment in India over the next three years is the headline of the week, on a scale matched only by the Posco steel project in Orissa.

Equally significant is Nissan's announcement that it will get Maruti [Get Quote] to do contract manufacture of small cars, mostly for the export market but also for selling to Indian customers - significant, because it confirms that India is becoming a global hub for the production of small cars. And Motorola's announcement that it will start manufacturing mobile handsets in Tamil Nadu adds one more to the list of handset manufacturers who think the Indian telecom market is big enough to locate manufacturing plants here.

It seems that just as the FIIs begin to re-do their maths on India and other emerging markets, FDI inflow is being planned on a matching scale.

The question is whether this is the end of the good times, or whether the India story is still unfolding. Both, perhaps. All the main markets (stocks, real estate, commodities) had begun to see a lot of froth, so some cooling down and condensation is welcome; in fact, this helps a return to sanity and good judgment - and it must be hoped that real estate prices of Rs 50,000 and more per square foot will not be heard of again.

Incremental bank credit had been running ahead of deposit growth for some time, by definition that pace could not have lasted, and so a slowdown in lending was inevitable. In fact, a slowdown in US demand, prompted by higher interest rates, may not be unwelcome if it helps the US address its twin-deficit problem.

As for the economy, the combination of high oil prices, rising trade deficits, tighter money and pressure on the rupee, does mean an over-all loss of tempo. The issue is: how much will things slow down? If the economy can sustain 7 per cent growth for the next year or two (compared to the more than 8 per cent for the past three years) - and there is no reason why it should not - the new mood of near-panic on the market is unwarranted.