Accounting worries have started creating nervousness in Indian markets too. Even as software firm Rolta India Ltd on Thursday denied a report that it had inflated sales and overstated profit, its shares tumbled the maximum 20 per cent to Rs 118.35 before making a small recovery to close lower by 18.71 per cent at Rs 119.50 amid huge volumes.On the other hand, reeling under continued pressure of panic sell-off triggered by a host of rumours about a likely accounting scam in Rolta and another leading foreign fund and the Wall Street plunge to a five-year low, equities dropped sharply pushing the Sensex down by about 42 points on the BSE. US STOCKS FALL, COMPANY CREDIBILITY UNDER ATTACK New York: Stocks ticked lower at midday on Thursday, on track for a fourth day of declines, after drug giant Bristol Myers Squibb Co dealt another stinging blow to investor confidence by becoming the latest target of Federal scrutiny. Technology stocks eked out gains at times amid some bargain-hunting in battered stocks. But the market drew little fuel from better news from household names like Yahoo Inc! and Eastman Kodak Co. Bristol-Myers confirmed its sales practices are being investigated by US regulators. The disclosure sent its stock down more than 12 per cent to 6-year lows. The Dow Jones industrial average slumped 150 points, or1.70 per cent, at 8,663, after sinking more than 2 per cent earlier. On Wednesday, the blue-chip gauge suffered its largest one-day percentage loss since September 2001. The Nasdaq Composite lost 3 points, or 0.23 percent, to1,342, off its session lows. The index ended on Wednesday at its lowest level since May 1997. Reuters Rolta topped volumes on the BSE, with 92.51 lakh shares being traded. The company, however, denied that it has inflated sales and overstated profit. “It is baseless and we deny it,” said a Rolta official. “We have not done anything that is wrong, he said.” It is learnt market regulator Sebi is looking into the Rolta issue.Networth Stock Broking said in a July 9, report that Rolta had capitalised sales of Rs 76.03 crore and claimed depreciation on that, possibly leading to profits being overstated. “Rumours of accounting scam in Rolta badly affected trading on the company’s counter and generated new concerns over corporate accounts,” dealers said.The report said, “sales turnover includes Rs 76.03 crore (previous year Rs 45.09 crore) being the cost of self assembled and/or integrated capital equipment transferred to company’s ISP division/export division. The same has been capitalised as computer plant under the head fixed assets and depreciation has been provided accordingly. The transfer cost includes material cost and estimated labour and overheard charges as certified by the management”.Clarifying the talks in the market about inflated sales and overstated profits, Rolta said: ‘The company has correctly and rightly reflected this addition to fixed assets in the cash flow statements since it involves outflow of cash by way of payment for material and overheads. This business practice is also followed by other major large corporates in India’.Adding to the woes, punters and retail investors resorted to heavy selling in several key stocks, mainly Reliance Industries Ltd and Rolta, on rumours that a leading US-based foreign fund has sacked one of its directors for involvement in accounting scandal, sources said. Sensex opened slightly lower at 3,332.15 and later moved downwards to the intra-day low at 3,287.91 before ending below 3,300-level at 3,290.56 as against yesterday’s close of 3,332.36, netting a fall of 41.80 points or 1.25 per cent.“RIL and Rolta bore the brunt of selling induced by fears that both the companies might suffer financial losses from the speculated scandal in a US-based mutual fund,” said a dealer. On Tuesday, US stocks sank to a five-year low after federal prosecutors launched an unspecified criminal probe into Qwest Communications International Inc, the latest in a string of high profile investigations into corporate America for accounting fraud. US indices have already taken a hit precipitated by the accounting problems of Merck, Enron, Tyco and WorldCom.
