Satyam Computers

India remains a good place to invest, despite the scandal surrounding Satyam Computer Services – one of the country's largest outsourcing firms. Analysts said even though there may be caution in the short term, they expect investors to recover soon to find profitable opportunities in the Indian market. Investors were shocked when Satyam's chairman Ramalinga Raju resigned on Wednesday after admitting that the company had inflated its earnings over many years. The news sent Satyam's stock plunging by as much as 80 per cent in Wednesday's trade. The Indian market was closed on Thursday. Long-term investors, however, are looking beyond the Satyam saga. They believe the problems at Satyam are likely to be limited to the company and are not representative of all Indian companies. Therefore, the overall investment potential for India remains. Aaron Smith, managing director, Superfund Financial, said: "Certainly in the long run, the thesis that India will be one of the most prominent economies in the future is going to hold. In the short run, we are going to see a big shock as we saw in the market. But in the long run, we expect India to be a profitable place." Profitable because the Indian market has a large consumer base and is driven by domestic demand. But for now, the Satyam scandal is likely to keep investors cautious and market sentiments negative. Ivan Ossa, director, Meritum Group, said: "I think it is safe to say that typically when we see something like this happen, it will take – depending on the size of the thing – longer than a week for markets to recover. "For this specific case, I think it is going to be very difficult for the stock to recover from this. The interim value of the stock has been affected because a lot of the things that were supporting it were not real, but I think going a month ahead, investors will start to understand a little better what had happened and try to discern the difference between Satyam and the rest of the market." Some observers also said they are not ruling out the possibility that other similar scandals could well emerge in the short term. Experts said the Satyam scandal is likely to result in investors paying more attention to the books of companies that they have put money into. Some quarters have also called for greater regulation on companies' earnings reports. But the jury is out on whether this will help to prevent similar episodes from taking place. - CNA/sources