The confession made by the Chairman of Satyam about the accounting scandal that the company had been indulging into for many years now shook investors’ confidence. This was seen from the sharp drop in stocks across sectors.
The BSE-Sensex closed lower by around 750 points, while the NSE-Nifty closed lower by 200 points. Stocks from the mid-cap and small-cap indices also ended deep in the red.
Extreme pessimism was witnessed in the markets today following the unraveling of the scam at Satyam. Selling activity was witnessed across sectors. Stocks from the realty, IT, energy and banking spaces led the pack of losers, while stocks from the FMCG and auto sectors were the least hit. Rupee closed at 48.8 against the US dollar. The Asian markets ended on a mixed note today. European indices are currently trading weak.
No doubt, Satyam was in the limelight for the entire session today. The confession made by the company’s Chairman, Mr. Ramalinga Raju, unleashed a spate of selling in the stock as it closed down by nearly 77%. The stock has in fact corrected by around 82% over the last month. It all started with the company’s so called ‘diversification’ move by way of transferring cash to promoter group companies. However, in light of tremendous pressure from investors, the management bowed out this proposal. Today, soon after Mr. Raju’s confession letter was put up on the BSE website, the stock went into a freefall taking alongwith itself the entire market. Strong pessimism among investors also brought down other heavyweights in the process. Other key losers on the Nifty were Unitech, Suzlon, Reliance Communications and Reliance Infrastructure. However, Infosys, HUL and Sun Pharma managed marginal gains.
"I am shocked and painfully dismayed at what has happened at an important software company in India," says Mr. N.R. Narayanamurthy, Infosys’ chief mentor and India’s sort of brand icon for ethical corporate governance practices. He goes on to say, "It is a total failure of governance. I only hope that relevant authorities get to the bottom of this and take appropriate action."
Moving away from Satyam, there is some good news on the economy front. As per initial government estimates, the decline in exports for the month of December stood at 1.6%. This comes as positive news considering that the preceding two months i.e., October and November saw exports decline by 12.1% and 9.9% respectively. It is believed that strong growth in sectors such as pharmaceuticals, engineering and agricultural commodities led to restricting the drop in exports during December.
As per a leading business daily, ICICI Bank is re-examining its used car financing business model and has decided to reduce the dealership commissions that it offers on such business. With higher delinquencies surfacing in the vehicle financing business, the bank has also decided to pare the credit limits offered to its direct selling agents. Interest rates on used vehicles are generally 3.5% higher than that on new ones to factor in the additional slippage risk. ICICI Bank being one of the largest banks in the used car loan financing business has witnessed an increase in bad debts in the recent quarters and is curtailing its retail lending to keep the bad loans in check.
