A lowdown on why markets are nervous

Factory production is inching up and inflation is softening. Despite this, Dalal Street is nervous, thanks to multiple concerns - some genuine, a few exaggerated.
GREEK DILEMMA
Will Greece default? Will it exit the Eurozone? Grexit, as they are calling it, could spark panic and risk aversion. Global investors may cut exposure to emerging markets like India which ships one-fifth of exports to Europe.
MAT
Indian taxman is asking Foreign Portfolio Investors (FPIs) to pay Minimum Alternate Tax (MAT) for past years - a tax that everyone believed was on local manufacturers.If pushed through, FPIs will have to pay 20% tax on long-term return on which no tax is paid now. But many feel New Delhi may go slow on MAT.
SLOWER RATE CUT
RBI will take its time to cut interest rates while banks are slow in lowering lending rates. Unseasonal rains may impact inflation and delay rate cuts.
BANKING WOES
Fewer people are parking money with banks; fewer still are taking loans. Many banks may have to raise return on deposit, lower lending rates and accept smaller margins. The mountain of sticky loans is the other worry. The S&P BSE Bankex has lost 8.4% in the past three months against 3.4% drop in Sensex.
WHY ISN'T GOVT STEPPING IN?
The govt wants India Inc to start investing while the latter wants the Centre to revive sentiment through big spending. Some public expenditure is inevitable, but the govt has little headroom given the fiscal constraint.
MUTED EARNINGS
A year ago, analysts said earnings would improve by Q4. Today, traders fear this could take at least another six months amid poor industrial and consumer demand. ET estimates net sales and net profit of Nifty 50 cos to grow 0.7% and 0.6% in Q4.
THE DRAGON SNEEZES
China may grow at its slowest pace in a decade. This may hurt commodities suppliers. On the positive side, it will lower inflation and input prices and help many Indian manufacturers.
THE ROAD AHEAD
Investors can use the drop in prices to bet on a recovery. Stocks of industrials will be at an advantage when economy picks up. Also, banks and auto cos may recover some losses if interest rates start falling.