Shocked at having turned into a pauper from a millionaire overnight by the plunging American stock markets, an unemployed Indian origin businessman took the extreme step of shooting and killing his wife, three children and mother-in-law, before taking his own life in Los Angeles.

Karthik Rajaram (45), who once made more than $1.2 million in a London-based venture fund, was found dead in his Porter Ranch home here along with his wife Subasri (39), mother-in-law (70) and three sons Krishna (19), Ganesha (12) and Arjuna (7).

Authorities believe Rajaram, an MBA, killed his family and himself after seeing his finances wiped out by the stock market collapse, Los Angeles Times reported on Tuesday.

"To us it appears to be a financial stake, a crisis situation that this man became embroiled in over the past few weeks," police said.

On September 16, Rajaram bought a gun. He wrote two suicide notes and a last will and testament. And then, sometime between Saturday night and last morning, he killed his wife, mother-in-law and three sons, and took his own life.

"This is a perfect American family behind me that has absolutely been destroyed, apparently because of a man who just got stuck in a rabbit hole," said LAPD deputy chief Michel Moore.

In a letter addressed to the police, Rajaram blamed his actions on economic hardships. A second letter, labeled 'personal and confidential,' was addressed to family friends; the third contained a last will and testament, Moore added.

• US Meltdown & Impact: Complete Coverage