Disclosure of scam adds to the panic in markets.

The debt crisis in European Union continued to haunt the markets globally. The Indian markets too tumbled today with both Nifty & Sensex closing low.

The 2G scam, which has been rocking Indian Parliament as well as Prime Minister Manmohan Singh, also contributed to the downfall of the Indian stock markets as telecom shares went on a downward spiral.

The PM has been forced to explain to the Supreme Court his failure to probe the USD 31 billion 2G scam.  

Former Telecom Minister Mr. A. Raja, accused of selling 2G telecom licenses at deliberately low prices to companies, during the 2007-2008 tendering process was sacked recently.

The Supreme Court publicly criticized Singh for his "alleged inaction" in response to Swamy's requests to investigate into the matter way back in 2008.

The court will examine the evidence of Singh's interactions with Raja, and the validity of Swamy's charge that the prime minister failed to act on his complaint.

Although the court cannot prosecute the PM but this would surely rock the Government and may lead to some substantial changes and shuffling.

The protests over Singh's alleged inaction have stalled parliament for the first 10 days of the winter session. This storm threatens to cut short the current session, putting at risk important bills such as an overhaul of India's mining regulations, a banking bill to improve the capital raising capacity of banks and legislation enabling free and compulsory education for children.

The political scenario had a negative impact on the stock markets too. Following the court's order to Singh, shares in mobile operator Reliance Communications and Unitech closed down 4.9 and 4.2% respectively on Thursday. Both Reliance and Unitech were noted in the report as having benefited from the alledged scam.  Investors fear that firms who have benefited from the scam may be forced to pay a hefty penalty that will severely impact their earnings in a highly-competitive telecoms market.

India's telecom minister has even considered cancelling licenses found to have been obtained through illegal means. This will be a huge blow to the telecom sector. Now, it is to be seen that what would be the outcome of the investigations and how it will affect our markets. A cautious trading in the markets is advised.