Indian stocks plunged 7.25 percent on Wednesday as investors were hit by a billion-dollar fraud scandal in major software firm Satyam Computer, dealers said. The benchmark 30 share Sensex index fell 749.05 points to 9,586.88, ending a run of four days of gains.
"The Satyam fraud has shaken the confidence of investors - both domestic and global - the repercussions of which could be felt over the medium-term," said Hitesh Agrawal, head of research with Angel Broking. Satyam's founder and chairman B. Ramalinga Raju admitted the Hyderabad-based software services firm had falsified accounts and assets and inflated its profits over several years.
The company overstated its cash and bank balances to the tune of 50.4 billion rupees (1.03 billion dollars) in its September-end balance sheet, "purely on account of inflated profit over a period of several years", Raju said in a statement.
Satyam shares plummeted 77.69 percent, or 139.15 rupees, to 39.95 rupees on the Mumbai Stock Exchange on Wednesday, as investors dumped the company. Concerns of a broader long-term impact on other IT companies saw major software stocks fall. India's earnings announcement season commences with top software exporter Infosys on January 13. In Wednesday's trade, losers led gainers 2,111 to 414 on turnover of 58.17 billion rupees (1.19 million dollars).
Last year overseas funds were net sellers of Indian stocks, having sold 13.13 billion dollars for 2008, official data showed. Reliance Industries fell 172.15 rupees or 12.52 percent to 1,196.8, on concerns that low crude oil prices will hit operating margins for the firm. Tata Steel fell 13.1 rupees or 5.31 percent to 233.65, after the company's sales volume dipped by about 14 percent to 1.07 million tonnes in third quarter December-end, due to the global economic slowdown.