The Big Bull ' Harshad Mehta'
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The Big Bull ' Harshad Mehta'

The Big Bull ' Harshad Mehta'

The Big Bull ' Harshad Mehta'

Deepak Sharma 10 Apr 2021

After the release of the ‘Scam 1992- The Harshad Mehta Story’ web series, the one name which is trending in India is Harshad Mehta. 

Now, Who was Harshad Mehta? What exactly did he do ?  


Harshad Mehta, aka "Big Bull" of India, aided and abetted one of the largest scams in India in 1992. He is well-known in the ‘Indian Stock Exchange Circuit’ for his wealth and lavish lifestyle. In the 1992 securities market scam, he was charged with several financial offenses, including using the money to manipulate the stock market by rigging the price of shares.

Mr. Harshad Mehta was accused of instigating a major stock market manipulation funded by worthless bank receipts that his company, Grow More Research and Asset Management, arranged for ready-forward transactions between banks.

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Early Days


Harshad Mehta was born in 1954 in Gujrat to a middle-class Jain family and spent his childhood in Mumbai. He received his Bachelor of Commerce degree from Lajpatrai College in Mumbai. Harshad tried his hand at a variety of jobs, including diamond cutting and accounting, but he made his biggest fortune in the Indian stock market. Mr. Mehta began his career as a salesman with the New India Assurance Company after graduation (NIACL).

After a few years of hustling and struggling to get the geek, he decided to try a career in the stock market and joined B.Ambalal & Sons, where he worked as a jobber for broker P. D. Shukla. People begin to recognize him as the ‘Stock Market's Amitabh Bachchan’ as time goes on. Harshad Mehta founded his brokerage company, Growmore Research, and Asset Management, in 1984.

He began actively trading in the market in 1986, and by 1990, others had joined him and were investing with his business. In the meantime, he attracted several high-profile clients, including then-Minister Mr. P. Chidambaram.

After being an industry veteran, he began to manipulate the market, causing the share price of Associated Cement Company (ACC) to rise from Rs.200 to Rs.9000 in less than three months.

How the Scam took place?


Banks were not allowed to invest in the stock market until 1990. Yeah, they were required to make a profit and keep a certain percentage (threshold) of their assets in fixed-interest bonds issued by the government. Mr. Mehta wisely took the money out of the banking system and invested it in the stock market. He assured the banks of a higher interest rate than the current rate. He requested that the funds be transferred to his account, claiming that he would purchase securities for them from other banks. 

To buy securities and forward bonds from other banks, a bank had to go through a broker at the time. Mehta got the idea from there to put the money into his account temporarily and buy shares. When the market was at its height, he began to raise the price of some shares of well-established companies such as (ACC, Sterlite Industries, and Videocon). When the shares are finally sold, he gives a portion of the funds to the bank and holds the rest in his pocket.

To carry out the scam, the security and payment were only delivered with the help of the broker. For example, one seller handed over the security to the broker, who then passed them on to the buyer, who then gave the broker the cheque, who then paid the seller. The buyer and seller will have no idea who they were trading with because the broker would be the only one who can link them.

The Bank Receipt was another widely used instrument (BR). The BR is the confirmation of a security sale, and it functions similarly to a receipt issued by the selling bank. I.e. the seller of securities sent a BR to the buyer of securities. A BR claims that the seller will deliver the securities to the buyer and that the seller will keep the securities in the buyer's trust in the meantime. 

Mehta figured out how to find a bank that would offer him fake BRs or BRs that were not backed by any government securities. The Bank of Karad (BOK) and the Metropolitan Co-operative Bank (MCB), both small and unknown banks, came in handy for this reason. He returned the money to the banks after the false BRs were released and the money was invested in the stock market and sold for a profit.


Background of the 1992 Securities Scam


  • Government Securities paper scam


In the early 1990s, Indian banks were prohibited from investing in the stock market. To retain their SLR ratio, they were required to hold a certain percentage of their total assets in government fixed interest bonds and shares (Statutory Liquidity ratio). 


There was an additional provision specifying that the average percentage bond holding for the week must be greater than the SLR ratio, but the daily percentage need not be, meaning that banks will sell bonds earlier in the week and buy them back later in the week.


The broker would act as a middleman for the banks. Harshad Mehta squeezed capital through banking system loopholes to meet banks' market maker requirements, then poured the money into the stock market and rigged the share prices. 


Indian banks were inefficient in their securities operations in the early 1990s, and they relied on stockbrokers to find a deal as a market maker. Harshad Mehta was a shrewd broker who found the flaw in a short period. Furthermore, he guaranteed banks a higher rate of interest and occasionally requested money be transferred into his account under the pretext of purchasing securities for them from other banks.


Mr. Harshad Mehta used this money from his account to purchase a large number of shares, causing the demand for those shares to spike and the price to skyrocket as well. Cipla, ACC, Hindalco, Sterlite, and Videocon Industries are some of the well-known firms. When the price of the stock skyrocketed, he sold. 


Consider the euphoria he instilled in the Indian Stock Market as "The Big Bull." The BSE Sensex rose by 247 percent in a year, from April 1, 1991, to March 31, 1992, setting a new high for a financial year in the Indian equity market.


The Big Bull V/S Scam 1992: Everything You Need To Know About Harshad Mehta  Stock Market Scam


  • Bank Receipt scam


Harshad Mehta's most profitable tool for pumping capital into the stock market was the Bank Receipt. In most cases, a BR contract was a ready-forward agreement in which shares were not transferred back and forth. The borrower of capital, i.e. the seller of securities, instead of issues BR to the buyer of securities. The sale of securities has been confirmed by the BR. It also serves as a receipt for the funds earned by the selling bank and a guarantee that the securities will be sent to the buyer. The seller keeps the buyer's securities in trust (as a novation). He required banks that could issue fake BRs or BRs that were not backed by securities after finding out this way.


Once the fake BRs were released, they were passed on to other banks, who then gave money to Mehta under the assumption that they were lending to other banks against government securities, which was not the case because the BRs were not backed by protection. The stock market had become overheated as a result of Mehta's buying spree, and the Sensex had risen 247 percent in a year.


Observed a few inconsistencies in Harshad Mehta scam series : Chodi


The 1992 Securities Fraud Outbreak


Sucheta Dalal, a young financial journalist, received a tip about the bogus BRs scam. Sucheta continued her investigation into the number of bogus BRs used by Mehta to pump the stock market. In the Times of India on April 23, 1992, Sucheta Dalal revealed Harshad Mehta's fraud.

When the fraud was revealed, banks realized they were keeping useless Bank receipts, Vijaya Bank's chairman committed suicide after intentionally issuing fake BRs to Mehta in exchange for a commission. Mr. Mehta died of cardiac arrest on December 31, 2001, at the age of 47, leaving behind the largest stock market scam of all time and the most historic bull run of all time, earning him the title "The Great Bull of Indian Stock Market."

The scam economy - Cover Story News - Issue Date: Dec 21, 2015

Harshad Mehta Scam Inference: 

According to some conclusions and facts, the activity was going on in the entire market and was used by all stockbrokers, and he was made a scapegoat because he believed in a bull run when the majority of the brokers were against it. They have to suffer substantial losses as a result of Harshad Mehta's actions. Without a doubt, the entire market's method was unethical, and after Sucheta Dalal revealed the fraud, regulators enacted strict rules and regulations to prevent the manipulation of shares to manipulate the stock market.

18 years on, Harshad Mehta's kin, firms to face trial for not filing tax  returns | Mumbai News - Times of India


How Harshad Mehta died?


Mr. Harshad Mehta spent one late night in Thane jail. He was admitted to Thane Civil Hospital after complaining of chest pain. He died with the following pain on December 31, 2001, at the age of 47, leaving behind the biggest financial scam in Indian history.

Closing Thoughts


This was Harshad Mehta, a man from a simple middle-class family who dreamed of a big house and jumped into the financial market's ocean, bringing a tornado with him. People made their fortunes with Mr. Mehta, but in the end, he was the culprit.

If you dream to become a Successful Investor or Stock Market broker and do not want to be a prey of such fraudsters, then we suggest you keep your expertise and knowledge up to date. NIWS (The Best Institute for Stock Market Training) has a couple of courses to help you trade stocks strategically, whether you need an introduction to stock trading and technical analysis or a guide on day trading stock options. With over 10-15 years of experienced professionals in domestic and international markets, we strive to help students to achieve their lifelong career goals and aspirations.



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