New Delhi. There are some names recorded in the history of India’s stock market which are always in the news. These names are sometimes remembered as inspiration and sometimes as warning. Harshad Mehta is one of those names. Born to an ordinary car dealer, this boy later became the ‘Big Bull’ of Dalal Street. Its rise sparked new dreams in the Indian stock market and its fall exposed the weaknesses of the entire system. This is the story of an extraordinary rise, an unprecedented bull run and a fall that has been recorded in history.
Ordinary beginnings, extraordinary ambitions
Harshad Mehta’s childhood was spent in a small colony of Kanjurmarg area of Mumbai. Father was a car dealer. Financially the family was not very strong, but Harshad had the passion to do something big from the beginning. Despite being average in studies, he was interested in understanding numbers, patterns and deals. This inclination later took him to the financial world. After college, he worked at various odd jobs—insurance agent, salesman, and later a clerk in a brokerage firm. It was from here that his luck started taking a turn. Harshad started understanding the market movements, price fluctuations, investors’ behavior very quickly.
Steps on Dalal Street
Harshad Mehta entered the stock market in the 1980s. Initially small deals, then big deals, his understanding and speed started attracting the attention of brokerage firms. Soon he started his own firm. At that time the stock market in India was not that developed. Limited investors, less rules and complex trading system, Harshad made these shortcomings his strengths. He became adept at running ‘bull runs’ by trading rapidly in the shares of companies. Stocks started rising on his one call and this saying became famous in the market – ‘Where Big Bull puts his hand, there is gold.’ Many such stocks like Akdi Glass, ACC, Videocon, Tata Iron started touching the sky due to his bets. Investors started looking at him like a god. The media called him the ‘Big Bull of Bombay Stock Exchange’.
Flaws in the banks’ systems… and the biggest scam in history
Between 1991–92, Harshad discovered a loophole in ready-forward (RF) deals between public sector banks. This was a transaction in Government Securities (G-Sec), which very few people understood at that time. Using these RF deals, Harshad injected thousands of crores of rupees into the market without any paper trail from the banks. With this money he fueled the rise of many stocks and increased the share prices manifold. ACC shares increased from Rs 200 to Rs 10,000. According to that time, this was almost impossible. But the bubble could not last long. In April 1992, journalist Sucheta Dalal revealed that the reason behind the rise in the stock market was the missing money of public sector banks. This was a scam of Rs 5,000 crore.
fall of the big bull
The market fell drastically as soon as the scam came out. Investors suffered huge losses. Harshad Mehta was arrested. Case, court, media trial… everything stood against him. After 1992, his empire gradually started collapsing. He was arrested for the last time in 2001 and died in the hospital the same year. At the age of just 47, a man who once had the entire market in his hands died.
Big changes in financial system due to Harshad Mehta scam
- SEBI got stronger powers
- Bank transactions become digital and traceable
- Transparency increased in stock exchanges
- New rules, new surveillance and new technology came
This scam was wrong, but it took a big step towards making the Indian market safe and modern.
