Satyam Accounting Scandal a big blot on Indian IT industry--

An accounting fraud was the last thing investors in India would have imagined as a trigger for a reversal in investor sentiment. The Satyam accounting fiasco has come at a time when the sentiment is already brittle and is likely to affect the image of Indian companies among foreign portfolio investors. The accounting scandal that caused Satyam Computer Services Ltd. to collapse is shaking investor confidence in Indian stocks, putting an end to the market’s best start since 2000. This unfortunate development will be a short-term negative for market sentiment. The country's fourth largest IT company - after TCS, Infosys and Wipro - was for several years cooking its books by inflating revenues and profits, thus boosting its cash and bank balances; showing interest income where none existed; understating liability; and overstating debtors' position.

India’s Sensex index tumbled 7.3 percent (on Wednesday), led by a 78 percent plunge in Satyam. Satyam American depositary receipts fell $8.42, or 90 percent, to 93 cents before the opening of the New York Stock Exchange, which then halted trading in the stock.

The Satyam scandal is spurring concern that India’s corporate governance is inadequate days before the earnings reporting season starts. What is SEBI for if it can't monitor business entities? Worries of thousands of employees and investors who have been left in crisis needs to be redressed immediately. The resignation of Satyam chairman Ramalinga Raju after confessing to have forged and inflated the company's accounts for years has sparked fears among the Indian IT firms. This is shocking, painful and a good warning for other companies in the sector.