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V Ú

Base year of Sensex, defined to be 100.
V p
Ú  on July 25,1990, the Sensex touched
the magical four-digit figure for the first time and
closed at 1,001 in the wake of a good monsoon
season and excellent corporate results.
V p  ÚÚ  ?n January 15, 1992, the Sensex
crossed the 2,000-mark and closed at 2,020
followed by the liberal economic policy initiatives
undertaken by the prime minister P.V.Narasimha
rao.
V Y
  Ú  ?n February 29, 1992, the
Sensex surged past the 3000 mark in the wake of
the market-friendly Budget announced by the
then Finance Minister, Dr Manmohan Singh.
V É
Ú  ?n March 30, 1992, the Sensex
crossed the 4,000-mark and closed at 4,091 on
the expectations of a liberal export-import
policy. It was then that the  É scam
hit the markets and Sensex witnessed unabated
selling.
V Š  
 ?n September 8, 2005,
the Bombay Stock Exchange's benchmark 30-
share index -- the Sensex -- crossed the 8000
level following brisk buying by foreign and
domestic funds in early trading.
V Y
  he Sensex on February 6,
2006 touched 10,003 points during mid-
session. he Sensex finally closed above the
10K-mark on February 7, 2006.
V  É  was an Indian stockbroker and is alleged
to have engineered the rise in the BSE stock exchange in
the year 1992. Exploiting several loopholes in the banking
system.
V Mehta and his associates siphoned off funds from inter-
bank transactions and bought shares heavily at a premium
across many segments, triggering a rise in the Sensex.
V When the scheme was exposed, the banks started
demanding the money back, causing the collapse.
V He was later charged with 72 criminal offenses and more
than 600 civil action suits were filed against him.
V He died in 2002 with many litigations still pending against
him.
V Harshad Shantilal Mehta was born in a Gujarati Jain
family of modest means.
V His early childhood was spent in Mumbai where his
father was a small-time businessman. His mother's
name was Rasilaben Mehta. His early childhood was
spent in the industrial city of Bombay.
V Due to indifferent health of Harshadǯs father in the
humid environs of Bombay, the family shifted their
residence in the mid-1960ǯs to Raipur, then in Madhya
Pradesh and currently the capital of Chhattisgarh
state.
V He studied at the Holy Cross High School, located at Byron
Bazaar. After completing his secondary education Harshad
left for Bombay. While doing odd jobs he joined Lala Lajpat
Rai College for a Bachelorǯs degree in Commerce.
V After completing his graduation, Harshad Mehta started his
working life as an employee of the New India Assurance
Company. During this period his family relocated to Bombay
and his brother Ashwin Mehta started to pursue graduation
course in law at Lala Lajpat Rai College.
V His youngest brother Hitesh Mehta is a practising surgeon at
the B.Y.L.Nair Hospital in Bombay.
V Ashwin joined Industrial Credit and Investment Corporation
of India (ICICI Bank) after completed his graduation. hey
had rented a small flat in Ghatkopar for living.
V In the late 70ǯs every evening Harshad and Ashwin started to
analyze tips generated from respective offices and from
cyclostyled investment letters, which had made their appearance
during that time.
V In the early 80ǯs he quit his job and sought a job with stock broker
P. Ambalal affiliated to Bombay Stock Exchange (BSE) before
becoming a jobber on BSE for stock broker P.D. Shukla.
V In 1981 he became a sub-broker for stock brokers J.L. Shah and
Nandalal Sheth.
V After a while he was unable to sustain his overbought positions
and decided to pay his dues by selling his house with consent of
his mother Rasilaben and brother Ashwin. he next day Harshad
went to his brokers and offered the papers of the house as
guarantee. he brokers Shah and Sheth were moved by his
gesture and gave him sufficient time to overcome his position.
V Mehta gradually rose to become a stock
broker on the Bombay Stock Exchange and
lived almost like a movie star in a 15,000
square feet apartment, which had a
swimming pool as well as a golf patch.
V Harshad Mehta was making waves in the
stock market. He had been buying shares
heavily since the beginning of 1990.
V He had been buying shares heavily since the
beginning of 1990. he shares which attracted
attention were those of Associated Cement
Company (ACC). he price of ACC was bid up to
Rs 10,000.
V For those who asked, Mehta had the
replacement cost theory as an explanation. he
theory basically argues that old companies
should be valued on the basis of the amount of
money which would be required to create
another such company.
V His Favourite stocks included
Ȉ ACC
Ȉ Apollo yres
Ȉ Reliance
Ȉ ata Iron and Steel Co. (ISC?)
Ȉ BPL
Ȉ Sterlite
Ȉ Videocon.
V hrough the second half of 1991, Mehta was the
famous of the business media and earned the
name as the ǮBig Bullǯ, who was said to have
started the bull run. But, where was Mehta
getting his endless supply of money from?
Nobody had a clue.
V ?n April 23, 1992, journalist Sucheta Dalal in a
column in he imes of India, exposed the
dubious ways of Harshad Mehta. he broker was
dipping illegally into the banking system to
finance his buying.
V ñIn 1992, when Sucheta Dalal broke the story about the Rs 600 crore that
he had swiped from the State Bank of India, it was his visits to the bankǯs
headquarters in a flashy oyota Lexus that was the tip-off.
V hose days, the Lexus had just been launched in the international market
and importing it cost a neat package,dz Dalal wrote in one of her columns
later.
V he authors explain: ñhe crucial mechanism through which the scam
was effected was the ready forward (RF) deal. he RF is in essence a
secured short-term (typically 15-day) loan from one bank to another.
Crudely put, the bank lends against government securities just as a
pawnbroker lends against jewelleryǥ. he borrowing bank actually sells
the securities to the lending bank and buys them back at the end of the
period of the loan, typically at a slightly higher price.dz
V It was this ready forward deal that Harshad Mehta and his team used
with great success to channel money from the banking system.
V A typical ready forward deal involved two banks brought together
by a broker in lieu of a commission. he broker handles neither the
cash nor the securities, though that wasnǯt the case in the lead-up
to the scam.
V ñIn this settlement process, deliveries of securities and payments
were made through the broker. hat is, the seller handed over the
securities to the broker, who passed them to the buyer, while the
buyer gave the cheque to the broker, who then made the payment
to the seller.
V In this settlement process, the buyer and the seller might not even
know whom they had traded with, either being know only to the
broker.dz
V his the brokers could manage primarily because by now they had
become market makers and had started trading on their account.
o keep up a semblance of legality, they pretended to be
undertaking the transactions on behalf of a bank.
V Another instrument used in a big way was the bank receipt (BR). In
a ready forward deal, securities were not moved back and forth in
actuality. Instead, the borrower, i.e. the seller of securities, gave
the buyer of the securities a BR.
V As the authors write, a BR ñconfirms the sale of securities. It acts
as a receipt for the money received by the selling bank. Hence the
name - bank receipt. It promises to deliver the securities to the
buyer. It also states that in the mean time, the seller holds the
securities in trust of the buyer.dz
V Having figured this out, Mehta needed banks, which could issue
fake BRs, or BRs not backed by any government securities. ñwo
small and little known banks - the Bank of Karad (B?K) and the
Metorpolitan Co-operative Bank (MCB) - came in handy for this
purpose. hese banks were willing to issue BRs as and when
required, for a fee,dz the authors point out.
V ?nce these fake BRs were issued, they were passed on to
other banks and the banks in turn gave money to Mehta,
obviously assuming that they were lending against
government securities when this was not really the case.
his money was used to drive up the prices of stocks in the
stock market. When time came to return the money, the
shares were sold for a profit and the BR was retired. he
money due to the bank was returned.
V he game went on as long as the stock prices kept going
up, and no one had a clue about Mehtaǯs modus operandi.
?nce the scam was exposed, though, a lot of banks were
left holding BRs which did not have any value - the
banking system had been swindled of a whopping Rs
4,000 crore.
V Mehta made a brief comeback as a stock market guru,
giving tips on his own website as well as a weekly
newspaper column. his time around, he was in
cahoots with owners of a few companies and
recommended only those shares. his game, too, did
not last long.
V Interestingly, by the time he died, Mehta had been
convicted in only one of the many cases filed against
him.
V ill now, it is still unknown what was the real story
behind the entire scam. he recent Hindi movie 'Gafla'
showed this scam in a different perspective.
V he CBI which is Indiaǯs premier investigative
agency, was entrusted with the task of deciphering
the modus operandi and the ramifications of the
scam. Harshad Mehta was arrested and
investigations continued for a decade.
V During his judicial custody, while he was in hane
Prison, Mumbai, he complained of chest pain, and
was moved to a hospital, where he died on 31st
December 2001.
V Mumbai: Just as the year 2001 was coming to an
end, Harshad Mehta, boss of Grow more
Research and Asset Management, died of a
massive heart attack in a jail in hane. And thus
came to an end the life of a man who is probably
the most famous character ever to have
emerged from the Indian stock market.
V In the book, he Great Indian Scam: Story of the
missing Rs 4,000 crore, Samir K Barua and
Jayanth R Varma explain how Harshad Mehta
pulled off one of the most audacious scams in
the history of the Indian stock market.
V he Securities Exchange Board of India (SEBI) was
established on April 12, 1988 through an administrative
order, but it became a statutory and really powerful
organization only in 1992.
V Government of India (G?I) issued an ordinance on 30th
Jan 1992 and pursuant to this ordinance SEBI was set up
on 21st Feb 1992. he SEBI Act replaced this ordinance on
4th April 1992.
V he regulatory powers of the SEBI were increased through
the Securities Laws (Amendment) ?rdinance of January
1995, which was subsequently replaced by an Act of
Parliament. SEBI is under the overall control of the
Ministry of Finance. It has since become a very important
constituent of the financial regulatory framework in India.