Sensex Down 750 pts due to Satyam Fraud

The Indian stock market was robbed of its stimulus Wednesday after one of the biggest corporate frauds came to light. In a shocking revelation, Satyam Computer Services Ltd’s promoter and chairman, B Ramalinga Raju admitted to a fraud to the tune of Rs 7,000 crore in the company’s balance sheet.

In a letter to the board, Raju said the company’s cash and bank balance as on Sep 30, 2008, was inflated by Rs 5,040 crore as against Rs 5,361 crore reflected in the books. Further, the balance sheet carried an accrued interest of Rs 376 crore which was non existent, and an understated liability of Rs 1,230 crore on account of funds transferred by Raju. The balance sheet also carried an over stated debtors’ position of Rs 490 crore (as against Rs 2,651 crore in the books).

This triggered a massive sell-off as investors dumped shares across the board, mainly from realty and IT sectors, on fears of corporate governance issues.

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The Bombay Stock Exchange’s 30-share Sensex closed at 9586.88, sharply down 749.05 points or 7.25 per cent from Tuesday’s close. The index touched an intra-day low of 9510.15 from a high of 10469.72.

National Stock Exchange’s benchmark Nifty ended at 2920.40, down 192.40 points or 6.18 per cent. The index touched an intra-day low of 2888.20 and high of 3147.20.

“Raju’s confession came as a shock for the market. Traders got out of realty companies as well on fears that they might also have similar skeletons in the closet. Sharp price in fall of Reliance Industries shares led to further pain,” said senior analyst from a local brokerage.

Not even the second rungs stocks were spared in the mayhem that followed. The BSE Midcap Index lost 7.17 per cent and BSE Smallcap Index fell 6.29 per cent.

“It is one of the worst days for Indian investors as a truly shocking and mind-numbing development transpired in the Indian corporate and stock market history. This has shaken the confidence of investors - both domestic and global -repercussions of which could be felt over the medium-term. Hopefully, this development will now lead to greater weightage being provided to corporate governance standards by companies and investors alike. As far as our view on Satyam Computers is concerned, we have ‘discontinued coverage’ on the stock with immediate effect and would advise current investors to exit the stock and nonexistent investors to stay away,” said Hitesh Agarwal, Head-Research, Angel Broking.

Also Read :
-Market response after Satyam Fraud
-SEBI to probe Satyam market Operations
-Effect of Recession on Indian Economy
-Economies hit by recession
-Plan for World Economy Revival
-Indian Economic Summit Updates
-Rs v/s US$ latest updates
-World's Strongest economies list
-Trouble in Indian Forex
-Indian Agricultural Updates
-US Economic recession-how it started


In the biggest single day fall for a stock, Satyam Computer lost 77 per cent to end at Rs 40.25 on NSE. The scrip touched a low of Rs 30.80 from a high of Rs 188.70.

Jaiprakash Associates (-29.15%), Reliance Communications (-17.02%), DLF (-16.15%) and Reliance Infrastructure (-13.54%) were the other top Sensex losers.

Hindustan Unilever (1.95%), Infosys Technologies (1.67%), Maruti Suzuki (0.53%) Wipro (0.23%) and Grasim Industries (0.13%) were the only Sensex gainers.

The Satyam episode led to 2,124 losers on the BSE and only 364 gainers.

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