Harshad Mehta: Lifetime Big Bull of the Stock Market

Harshad Mehta: In the 1990’s Harshad Mehta is popularly known as Amitabh Bachchan of the stock market. They called him as so as he profited some crores of money. He owned some luxurious cars like Lexus and others under his properties. In 1990 he was the highest taxpayer to the government. But later in 2 years his business and everything collapsed. He spent his life in Jail.

The early life of Harshad Mehta

Harshad Mehta was born in Gujarat in 1954. Later, in a few years, their family has to migrate to Mumbai. So his studies were taken place in Mumbai itself. He completed B.com in 1976. So soon after finishing his education. he worked for 4 years in clothes shops, cement shops, insurance, jewelry, and some small shops.

Harshad Mehta Passion

Harshad Mehta has a habit of reading regular newspapers and that too business column. So he used to read articles regarding the stock market. And therefore he has concluded that many are becoming rich in the stock market. So he a was little passionate about the stock market. And so he used to buy the success stories of the stock market. So in these 4 years, he learned many things related to the stock market.

Mehta into Stock market

So in 1980, he joined as a clerk in a brokerage company. A brokerage company is nothing but it is a mediator that advises customers about investing money in stock. And some amount of money is charged to these brokerages for giving advice. And this also acts as a platform for stock buyers and sellers. Harshad Mehta worked in the same company for 4 years. In this time he started to invest in companies. And he also suggested his friends invest in some specific stocks. So his friends also benefitted from his ideas. He earned a lot of money by investing in those companies in 4 years.

Stock Market
STOCK MARKET!

Beginning of GROWMORE

In 1984 he resigned from his clerk job in a brokerage company. And started his own brokerage company. So this company is nd Growmore research and assert management. So he used to advise many of the customers. And so he got many profits. So he also got profit by investing in stocks and through brokerage company commission. Everything was alright until 1990. So it means everything is clear for almost 6 years.

But later in 1990, his mind went greedy on money-making. So he started to find out the loopholes in the system.

harshad mehta
Harshad Mehta

stock market manipulation

So he used a trick called stock market manipulation. Simply, for example, if a company has 100 shares then each share maybe 1 rupee. Then a person buys 100 shares for 100 rupees. And later he will sell the shares for 200 rupees. Familiarly, he buys for 300 rupees and sells for 400 rupees. And so this chain goes on until the trick is out.  This is applicable if there is more money amount. So Harshad Mehta needs the help of a bank for funds. And he started to find out the loopholes of the banking system.

Broker to the Banks

If a government needs any financial help. Then it announces in public. So people and banks help. So thereby banks will pay interest per annum and principal amount. Forgiving money to the government by people. Then government issues government securities to the people and banks. So if these fund given bank is in crisis then it keeps government securities as security and takes money from another bank. So by keeping these government securities as banks will take money from another bank. This is called a ready forward deal.

Brokerage companies will act as a middle platform for these both banks for the ready forward deal. Brokerage company will search for a funder who is ready to give funds for needed banks. And Harshad Mehta is a brokerage for two companies. He used this trick to scam the process.

Example

Let us consider X, Y, Z as three banks. If X needs money it approaches Harshad Mehta. And if Y is ready to give money then it approaches Harshad Mehta. So Harshad Mehta is the middle person between bank X and Y. Then he takes cheques and gives them to bank X. Bank securities are issued by the name of Harshad Mehta instead of bank X.
According to the Rule of RBA, Bank securities are issued by the bank name, not for brokers in between. So banks trusted Harshad Mehta and issued cheques in his name. But in reality, it should not be able to do.

Bank Securities

Bank securities are not directly given bit bank receipts are given. And this is called Bank receipts (BR). Harshad Mehta found out a major loophole in the system. So he made a fake bank receipt instead of original bank receipts. And he used to manage with the fake bank receipts. So the amount he got is used in the stock market. He used to keep money in the stock market which got from banks. Harshad Mehta used to buy most of the shares.

And in a case, if bank B asks Harshad Mehta to repay his amount, then he refers to bank C. And this process continues. He used the fake BR’s and made a Scam.

Real-life Example

For instance, if I borrowed money from friend A, shiva. Then In the situation of friend A, shiva asks me for money. So then I approach another friend B. I ask for money from B and repay friend A. But if friend B asks me to pay. Again, I approach friend C. Likewise, this continues.
Similarly, Harshad Mehta used to rotate the money.

ACC Manipulation By Harshad Mehta

Harshad Mehta sells the shares when they reach peak values. And when he gains money, he used to pay money to banks. Because of his manipulation ACC share value is increased from 200 rupees to 9000
Rupees. He gained much and much money from the stock market.
Suchita Dalal, a journalist found the tricks of Harshad Mehta. She published an article on the stock market.

A News Article on Harshad mehta

People after reading the news started selling their shares and stocks. Just because of the news article. People believed and sold their stock. Then the stock value is decreased gradually. And many people also lost their money too. Few banks also knew that they have fake receipts. Now, there is no way for Harshad Mehta. He cannot sell the stocks and pay to banks. Because of sto of focus e I and negative position. If he sells his shares then he wouldn’t benefit from it because the value is decreased.

Cases against Harshad Mehta

So a case is filed against Harshad Mehta. And he was sent Trail a few days. But after a few days h,e, came out on bail. But still many cases are registered against him. The investigation is under process. And almost everything is collected from him.

A non-bail Case

In 2001, he was in a critical case. Bail is also not issued in this case. And he was kept in the haar Jail. One day he got a heart attack. Police sent him to the hospital. But he lost his life. In 2001, December 31 at the earliest age of 47. He lost his breath.

A BIG SCAM of Harshad Mehta

Because of this scam, earlier people got profit. But later they were stuck with heavy losses. In total he should pay 4500 crores of money has to pay for the banks. In the latest days, almost its value is nearly 24000 crores. And which is almost 5 times that of the original one.

Loopholes Rectification

And because of the Harshad Mehta scam, the loopholes are found. Loopholes of the stock market are further rectified. The government later cleared all the loopholes and mistakes.

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