Foreign investors in India are usually willing to overlook the odd hazard in their hunt for profits from one of world's fastest-growing economies. That strategy has worked out fine, with Indian stocks hitting an all-time high this month.

But every once in a while, a reminder of the risk emerges. A scandal that erupted this month at New Delhi's telecommunications ministry is proving to be just that.

The ministry is accused, by the Comptroller and Auditor General of India, of mismanaging a 2008 issuance of wireless-spectrum licenses. That has led to the resignation of the telecom minister and has even put the prime minister on the spot.

The most damning complaint is that the fumble deprived India of as much as $39 billion in revenue. But the auditor also alleges that companies involved misrepresented themselves in order to qualify for the bids.

What happens next is uncertain, but many investors aren't sticking around to find out. Reliance Communications, which owned a company that is accused of flouting ownership rules, has seen its share price drop 13% in the past week. The auditor also has complained that Reliance itself received "undue benefits" from the telecom ministry.