Author: Ritu Singhal, Prestige Institute of Management and Research, Indore
Overview of the Harshad Mehta fiddle
The Harshad Mehta fiddle was about exploiting loopholes in India’s banking system to channel plutocrat into the stock request. Mehta and his associates set up creative ways to tap into bank finances and use them to instinctively inflate stock prices. The fiddle Unfolded between 1991 and 1992 when India’s frugality passed major reforms. The government had just opened up the frugality, and there was a lot of sanguinity in the air. The stock request was booming, with the Sensex climbing from around 1000 points to over 4500 points in just a time. Mehta took advantage of the lax regulations and the excitement in the request. He used a web of bank bills, ready-forward deals, and fake securities to pierce huge totalities of plutocrat from banks. This plutocrat was pumped into select stocks, driving their prices to unrealistic situations. The scale of the fiddle Was massive. Estimates suggest that Mehta and his associates siphoned off around ₹ 4000 crore from the banking system( worth over ₹ 24,000 crore in moment’s plutocrat). The following stock request crash wiped out wealth worth ₹ 1 lakh crore. But further than the plutocrat involved, the fiddle‘s real impact was in exposing the deep in India’s fiscal system. It led to major reforms in banking, stock requests, and fiscal regulations that continue to shape our requests moment.
INTRODUCTION
The 1992 stock request fiddle Is frequently appertained to by the perpetrator’s name who brought about the downfall of the stock request Harshad Shantilal Mehta. The fiddle Featured embezzlement of Rs 1439 crores($ 3 billion) that led to a severe crunch and drastic loss of wealth in the life savings of numerous investors that amounted to Rs 3542 crores($ 7 billion). Harshad Mehta is also framed as a victim due to alleged political alliances that included prominent governmental numbers. Still, it remains true that Mehta exploited the loopholes for his particular benefit, manipulated the request and was heavily involved in numerous banking frauds.
Understanding Harshad Mehta Scam
In a country broken under major political and policy grounded profitable reforms with the liberalization, privatization and globalization( LPG) process of opening the frugality to the world, Mehta thrived and was rich beyond the being norms. Mehta had what people could consider a rags to riches story from being a bare emigrant to the megacity to getting a famed stock broker in BSE. He was called the ‘ Big Bull’ after resounding success with his Grow further Research and Asset Management establishment after numerous a series of odd jobs. He possessed shares of Associated Cement Company( ACC), which saw an inexplainable swell in price from a bare Rs. 200 to a Rs. 9,000. Mehta justified that the stock had only been underrated each on, egging a request surge of investors swarming to his investment choices. The crusade, coupled with the broken fiscal system that was beginning to find its base in the country that Mehta saw his benefit in, led to the request’s downfall. The crucial reasons why Mehta is held responsible for crimes is due to his heavy involvement in request manipulation, exploiting the loopholes of the banking system, embezzlement etc.; he was condemned for 23 crimes, but he failed in captivity after being charged for only four.
Highlights of Harshad Mehta
Swindle The pivotal instruments used in the great swindle were stamp papers, bank bills, ready forward deals, and advanced interest rates. Sucheta Dalal exposed Mehta’s crimes and involvement in the columns of Times of India in 1992 after taking keen interest into his excessively luxurious life. As valued in 2019, the Harshad Mehta swindle had swindled nearly Rs. 250 Billion from the banking system. The goods of the swindle while not persisting directly, still affect the conservative investors’ mindsets. Ketan Parekh, an associate working under Mehta, would subsequently go on to resuscitate a similar crime in the stock request in 2008 and be condemned for his involvement in request manipulation in 1992.
Impact of Harshad Mehta fiddle on the Indian Stock Market The Harshad Mehta fiddle had a profound and continuing impact on the Indian stock request
Immediate Crash : The most immediate impact was a severe stock request crash. The BSE Sensex, which had risen to 4467 points in April 1992, crashed to 2529 points by August- a fall of over 43.
Loss of Investor Confidence : The fiddle Oppressively shook investor confidence. Numerous retail investors who had entered the request during the bull run suffered heavy losses. This led to a general mistrust of the stock request among small investors, a sentiment that took times to recover.
Regulatory Overhaul : The fiddle Exposed major sins in the nonsupervisory frame. This led to establishing the Securities and Exchange Board of India( SEBI) as a statutory body in 1992 to regulate the securities request.
Banking Reforms : The fiddle Stressed the need for stricter banking regulations. The RBI introduced new rules for banks’ government securities investments and tensedinter-bank sale morals.
FREQUENTLY ASKED QUESTIONS :
Who was Harshad Mehta?
HArshad Mehta was a stockbroker and businessman who became infamous for his role in the 1992 securities scam. He was known as the “Big Bull” for his aggressive trading style and ability to manipulate stock prices.
What was the Harshad Mehta scam?
The scam involved the fraudulent use of funds from banks and financial institutions. Mehta manipulated the stock market by taking advantage of loopholes in the banking system, using fake bank receipts, and illegally diverting bank funds into the stock market to inflate stock prices.
How did Harshad Mehta manipulate the stock market?
Mehta used a technique called “circular trading” to inflate stock prices artificially. He manipulated the money market by securing short-term bank funds through fraudulent means and then using these funds to buy large volumes of shares, driving up their prices. This led to a bullish market, with stock prices soaring to unsustainable levels.
