The scam 1992 is the largest scam in the history of indian stock market. It was a market manipulation carried out by Harshad shantilal Mehta with other bankers on BSE (Bombay stock exchange). The scam caused significant disruption to the Indian stock market.
Harshad Mehta born in a ordinary middle class family, on the year 1954 in rajkot, Gujarat. At the age of 22(1954) he completed his b.com in 1976 from lala lajpatrai college, mumbai. In the year of 23 he had a dream to be rich and live a luxury life, so he found a way, that was stock market. Because he knew that, investing stock market made a lot of people rich, but he didn't have the money for investing stocks, so he joined in a stock market broking firm as a jobber, and he used his canvasing skill and brain to best for this job. He made profit for the firm, and also he learned about stock marketing and he made many connections with bankers, and companies. At the age of 30 (1984) he started his own stock broking firm. Canvasing skill of his made some small scale investers to his clients and he started to invest in some penny stocks and started to manipulated the stock price. He created an artificial demand on cheap stocks, and the value of stock increases he sells the stock, that made him profit but also people finds out "how the undervalued stocks have high price? Harshad Mehta solved this problem by creating cost replacement theory. "The stock value of a manufacturing company should be valued at what it would cost to set up a similar plant”. -This was the cost replacement theory of Harshad Mehta, this theory he created for himself but the people trusted blindly. Harshad Mehta got profit by this but some other investors got loss.
By the stock market manipulation, he got rich and luxury life but that wasn't enough for him, so he decided to start money marketing. The money market deals with banks, government and RBI. The money market is the government securities buys the bank and lend money to government and other banks. The bank to bank transactions is don by the instrument called BR. Harshad Mehta was a rich gentleman, so the banks agreed to deal with him. But he made some fake BR from his connections and bought money from bank. He invested the money in stock market, and started to manipulate stocks in large scale. For example he created a stock called ACC worth Rs.200 to Rs9000, This thing also the other money market brokers did, but nobody broke the equilibrium, but Harshad Mehta didn't cared about the equilibrium.
The scam in 1992 is worth Rs.5000 CR,so it can't be done only by one person, the top positioned people like politicians, bankers and financial firms are involved in this. But the main face and brain was Harshad Mehta, by the second half of 1991 Mehta earned the nick name "big bull". Because he was said to be started the bull run in the stock market. At the time of 1991 Mehta had fifteen thousand square feet pend house and luxury foreign cars, he lived like an emperor.
But in 1992 the great Indian financial journalist Sucheta dalal found out about the scam of Harshad Mehta. Sucheta Dalal was investigating about the way of found of Harshad Mehta since 1991 to 1992. On 23rd April 1992 she published an article of Mehta that he manipulated the stock market, after that CBI investigated on that, and 9th November 1992 Mehta and his brothers were arrested by CBI. then everybody realized that the stock values are manipulated so the stock market crashed and banking system collapsed, it leads to a massive crisis in Indian economy.
At the age of 47(2001) Harshad Mehta was died in a jail,but the cases charged on him and his friends is going on in court. In the year 2006 the exposer of the scam "Sucheta Dalal got patma shri by the President A.P.J Abdul Kalam". The life of Harshad Mehta tells us that we don't keep our ethics to our work, we cannot experience it's benefits.
VIDHUKRISHNAN
I Sem B.COM Finance
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