All courses includes the following

Scam 1992 review: Harshad Mehta Scam story


Harshad Mehta Scam is now trending again, and in this blog, we’ll be covering the Scam 1992 web series review, telecasted on SonyLiv. This web series is based on the book, The Scam written by Sucheta Dalal and Debashis Basu. In Scam 1992 web series the role of Harshad Mehta, also known as The Big Bull is played by Pratik Gandhi whose acting has been amazing throughout the whole series, whereas the role of Sucheta Dalal is played by Shreya Dhanwanthary.  With Scam 1992, the biggest scam in the Indian stock market is unveiled.
Let’s unfold Harshad Mehta Fraud. 

In the earlier days, the financial conditions of Harshad’s Mehta family were not that good.  Due to which, he initially took a lot of small jobs. His sole dream was to become rich in a short span of time. And these small jobs were not helping Harshad to become rich. Thus, he was continuously looking for such opportunities which would make him rich within a short period of time. At a later stage, he met a few acquaintances who were becoming rich and earning a lot of money through investing in the stock market. This thing intrigued him a lot, and thus he decided to enter into the stock market. 

Initially, he started off working with some stockbrokers and become a stock broker himself. While working there, Harshad Mehta got to know about a term called Insider Trading and he heard that people are earning a lot of money through this investment, and are becoming rich. Finding this as his golden opportunity he, also started doing the Insider Trading. Any information which impacts the company’s share price is called insider information.


The information which can impact the share price of the company is provided to the stock exchange and then this information is forwarded to the people. For instance, if the company gets a big contract or that company is going to make a big deal with another company, which can impact the share price of the company, this information first goes to the stock exchanges, and then this information will be forwarded to the public. But sometimes, such information gets leaked before reaching the stock exchange. Many people use this information by taking a position in the stocks. For example, when people like Harshad Mehta got the insider information of a company and when he sees growth in that company, then he, with the insider information he buys the shares of the company before the information reaches the stock exchange. After when the information reaches the stock exchange, it gets forwarded to the public and then accordingly the public starts buying the shares, which led to an increase in the share price. After the increase in the share price, Harshad Mehta used to sell the shares and used to book his profit. So, through this insider trading, Harshad Mehta was successful in earning quite a lot of money. 


Harshad Mehta wanted more. He didn’t want to stop with the money he had. He started to find out more ways to become rich. Harshad Mehta discovered that there are many people who manipulate the share price in the stock market, they either increase or decrease the share price and thus, these people are called the operators. With this, Harshad Mehta started manipulating the shares and became an Operator himself. In the stock operating system, the Pump and Dump scheme is generally used. 

In the pump and dump scheme, operators like Harshad Mehta first invest their money in 1 or 2 stocks and then they tell people to do so by stating them that the price of that particular share will increase. Many people who got into this manipulation of Hashad Mehta, started to invest in these stocks, and when the share price increased, he earned a handsome amount of profit. At a later stage, Harshad Mehta through his company, Growmore Research used to increase the share price of many companies, and in return, he took a commission from them. For manipulating the shares, Harshad Mehta initially invested the money of the investors of Growmore Research, but as the need for money grew he reached out to the banks. This was because the banks and government institutes used to have a lot of money with them. Harshad knew that if he utilises that money he could earn a good amount of profit. Thus, he was successful in finding out a way of using banks money to manipulate the share prices. 


Many times, the government needs money to reach its expenses and for this government raises money through government bonds. Generally, the government, through government bond borrows money from big institutions. Many banks are told to invest some portion in the government securities, this is mandatory for some. So if sometimes the bank feels the need to take a short term loan then they just mortgage their government securities to some other bank. This process is called the RF Deal or the Ready Forward Deal. So in this RF deal process, two banks are involved one bank becomes the lender and the other bank becomes the borrower, and within these banks, two things were involved one was the money and the other was the bank receipt. 

Let us clear this thing with an example. For instance, if the Punjab National Bank wanted to give short-term loan to State Bank of India through this RF deal, then they will transfer the money to the SBI and in return, SBI will provide them with a bank receipt. Bank receipt here would mean that SBI has successfully given the securities to the Punjab National Bank, and have successfully received the money from them.  The work of Ready Forward Deal used to generally happen on a very large scale, due to which some healthy relations emerged between the banks and the brokers. These brokers played the role of mediators between the lending and the borrowing banks. They used to gain a lot of trust from the banks, that sometimes lending banks used to directly transfer the loan amount to the brokers and then the broker used to forward it to borrower bank and then forwarded the bank receipt from the borrower to lender banks. 


The Beginning of Harshad Mehta Fraud: 

Harshad gained trust of the banks, and whenever there was a Ready Forward Deal, he used to get the money in his own account, and then he used to use that money in the stock market to manipulate the share price. When the bank used to ask for the bank receipt then Harshad used to give them a fake receipt or sometimes delayed the process of giving the banks receipt. He used to use the money of bank in the stock market for a few days, and after a few days, he used to return the money back to them. This system worked out great, as the market was growing and so did Harshad Mehtas pocket. 

When the market started going down, this effected Harshad drastically, as the share prices of the companies were also going down in which Harshad had invested. Due to this, he found it very difficult to return the money. So while using the banks’ money in the stock market, Harshad Mehta faced many losses as the market was down. Due to which he started approaching different banks for the RF Deal in return of short term loans, and taking their money he used to clear off its earlier debts. But as they say “that when bad time comes it kicks us hard on the face”, and this is what started to happen with him.
Now, as the stock market started to go down more drastically, Harshad Mehta losses increased more and more in the stock market. The 1992 stock market crash impacted the stock market so badly.  This led to his failure to clear off its debt of various banks, and thus, this SCAM came out in front. Many government banks faced losses, and indirectly common people faced losses. 

By manipulating the stock prices, Harshad Mehta earned a lot of money. Once he was also India’s biggest Advance Tax Payer. With this ample amount of money, Harshad Mehta bought many luxury cars, big bungalows. There were many operators at that time also who used to manipulate stock prices, but Harshad Mehta came out to be big among them. In this stock market scam, many politicians, as well as many operators, were also included with Harshad Mehta, but they were successful in saving themselves from this scam when it came out in front.  After Harshad Mehta, an employee in his company, namely, Ketan Parekh also did the biggest stock market scam in India. That scam also, along with the Harshad Mehta scam was unfolded by Sucheta Dalal. 

The Scam 1992 web series of SonyLiv is an amazing series, which everyone should watch, as with this you will get to know so much about the financial market. All the characters have outstandingly performed well.

Happy Reading!!

(Please note: This is not a sponsored blog by SonyLiv)


Start investing today with India's fastest growing online brokerage platform. One day, one account, lifetime validity. Click here to get started.

Did you enjoy what you read? Subscribe to our newsletter and get content delivered to you at your fingertips!!