India's Supreme Court on Thursday revoked 122 telecoms licences issued under a scandal-tainted 2008 sale in a judgement that could further darken the business climate in Asia's third-largest economy.

Licenses held by five companies including the local joint ventures of Norway's Telenor and UAE's Etisalat  were cancelled in the verdict, calling into question the stability of business contracts and regulation in India.

The Supreme Court ruling said the current licenses will remain in place for four months, in which time the government should decide fresh norms for issuing licenses, a lawyer involved in the case said.

India's image as an investment destination was dented over the past year as the economy slowed, government reforms stalled and the telecoms scandals along with other high profile graft cases heightened concerns about government policies. 

Stocks in telecoms companies including Reliance Communications and Unitech fell after the verdict, but shares in competitor Bharti Airtel  jumped. Telenor has about 36 million subscribers in India and Etisalat has fewer, making them small players in a market dominated by Bharti Airtel, Vodafone and Reliance Communications.

The telecoms scandal is the biggest of several that have emerged during Prime Minister Manmohan Singh's second term and has weakened him. Two ministers, including former telecoms minister Andimuthu Raja, who presided over the 2008 grant process, have resigned. Raja is in jail pending trial. - Reuters