Professional Documents
Culture Documents
• Liberalization of economy
In June 1991, the new government accelerated the process of economic
liberalization under the auspices of the international monetary fund. The opening
up of Indian economy as a result of these measures promised an unprecedented
growth and prosperity for the private participation and various administrative
impediments were being removed.
This was the time Harshad Mehta and his associates decided to strike.
INSTRUMENTS USED IN THE SCAM
Ready Forward Deal (RF) :
Ready forward is a short term loan (typically 15 days or less) usually from one bank
to another. Unlike other Loans , it is actually a secures loan with government
securities backing it up.
Bank receipt (BR):
Another instrument used in this scam was the bank receipt(BR). In an RF deal,
securities were not moved back and forth in actuality. Instead , the borrower , who
is the seller of securities, gave the buyer of the securities a BR . In practice,
borrowing bank gives a Bank receipt instead of delivering the actual securities to
the lender.
THE SCAM :
MAJOR INVESTMENTS
Taking advantage of the loopholes in the banking system Harshad and his associates
triggered a securities scam diverting funds to the tune of Rs.4,000cr. He caused the
steeps price in the stock market in the year 1992 by binding at a premium for many
shares.
Some of the stocks which were highly invested in by Harshad Mehta :
• ACC
• Apollo tyres
• Reliance
• Tata iron and steel co.(TISCO)
• BPL
• Sterlite
• Videocon
SENSEX PERFORMANCE :
During the Scam period, Sensex was at its peak. But as soon as the Scam was
revealed in April, the Sensex drastically fell landing all investors in great loss.
EFFECT ON SHARES
IMMEDIATE IMPACT
He was later charged with 72 criminal offences, and more than 600 civil actions suits
were filed were filed against him.
He was arrested and banished from the stock market.
Mehta and his brothers were arrested by the CBI for allegedly misappropriating more
than 27 lakh of about 90 companies.
REFORMS IN THE SYSTEM
• https://www.youtube.com/watch?v=fmbYeOTdCQs&t=5s
KETAN PAREKH :
Pied Piper of D-Street
Brief History :
• CA by profession, started his career as a trainee
under Harshad Mehta
• Hailing from a family of brokers, had a network
of close knitted brokers across stock exchanges
• Convicted in 2008, for involvement in the Indian
stock market manipulation scam in late 1999 to
early 2001
• Circa 1.7 billion INR was moved, SEBI
investigations revealed
• Defrauding Bank of India (BoI) of about 137
crores
K10 STOCKS : OVERVIEW :
• Identified and targeted 10 stocks
from the emerging ICE Sectors
• K-10 stock, KP Index
• Share prices of Zee Telefilms
went up from Rs. 127 to Rs. 2330,
Himachal Futuristic –Rs. 194 to Rs.
2553
Mechanisms used :
• Badla System
• Simple Borrowing System
THE OPERATION:
STOCK EXCHANGE