Thursday, December 9, 2010

What is happening in market?

I know that readers are in delima.What to do ?Whether to average or sell or hold?
This is a very typical type of situation.SEBI has barred Mr.Sanjay Dangi and its properiety firm.Sanjay Dangi said he is going to challenge the verdict.
The name of yesteryear Big Bull(Ketan Parekh) has come in Media that he is operating through front entities of his coetire and is trying to bring him to books.
His old scams examples are coming up in media to scar the investors.
These a clear fight between BULL and BEARS.
This fight is very old.Maybe some 3 decades and more.But the first blood was drawn when Harshad Mehta fought his first battle.Around mid 80's, stock market was completly in rein of bears.There were perticular group who always play the bearish game.They never let any stock go up on fundamentals even if the earnings are growing exponentially.At that time, ACC, Tisco(Tata Steel),Tata Motors, Century Tex etc etc were 100 paidup shares and their price use to remain in the vicinity of 170 to 380.Means if we take current 10 paidup then they use to remain in 17 to 38 rupees range.
The price of these 100 fv stock will go up from 170 to 210 or 240 as soon as the Div is declared and will come back again to 170 as soon as it becomes XD.
If Bonus is declared then it will go to 380or max 400-500.That's it.These the Bears lobby will never let it go above those level and if someone try to take it up from that his stock is hammered in such a way through bear gang that he is out of the market.Such was the power of these bear lobby.When a series of short selling takes place then there is no way an individual can do anything to them.Many tried to swim against the tide of bear cartel but were annihilated or buchtered and became bankrupt and lost everything including their houses and jwelleries.
Then came the entry of Harshad Mehta.He was already there watching all these for sometime.But he took up the challenge singlehandedly and took the fight in bears camp.When he took charge, ACC was 300 and Castrol was 400 and he started making position in ACC.He started buying ACC in Futures which then was known as carryforward trade and the Interest one has to give for carry forward trade for every week , or week by week was known as Badla .
If one has short sold stock and he wants to carry forward it then the int. he use to earn was known as undha badla where the short sellers use to gain badla(interest) and that was a very confusing deal.In the sense that a person who short sell gets the int(badla) from who is long.
Well, Harshad Mehta became bull in that time around late 80's and early 90's and he started buying ACC and Castrol in Longs and in futures( which was known then as carryforward trade).
He kept on buying ACC from 300 , 400, 500, 600, 700 and bears went on selling ACC thinking over 500 ?Oh that can never be the price of ACC.They had never let ACC go beyond that so they went on short selling uptill 1300-1400 and Harshad Mehta kept on buying ACC from bears uptill 1400 and it was alomst all eq was dried up for bears to short sell and they even shortsold over and above that and Harshad Mehta kept buying that came from bears.
Bears were never able to understand how HM is able to buy all they sell.How the money is coming because for any thing to buy , one has to dole out money for that buy he somehow managed with that through banks receipt.
And then the real game started when Dr Manmohan Singh, then Fin Minister, opened up the gates for FII's in 1992 and the market went in frenzy.
ACC went going up and up and it touched Rs.10,000(means 10 paidup, 1000).Now imagine the price people use to see for ACC for decades which is never above 400-500 and it become 10,000!Beras never imagined that ACC can touch Rs 10,000 and no one imagined that.
All these happened in 4-5 months.Bears were in a very bad situation.If we say that avergae price they short sold ACC was a median of 200 and 1400 then it comes to 700 or most probably 800 or 1000 and the price became 10,000 , so the difference between 10,000 and 1000 is a HUGE 9000 rupees! and if someone  has short sold just 1000 shares he has to pay the difference of  rs.90 lacs in year 1992 and rs 90 lac was a very big amt in 1992 .Just imagine those bears who short sold 10,000 or 1 lac or 2 lac or 5 lac shares what they have to dole out as difference?No way they can fulfill the trade.They have to go to Harshad Mehta and tell him to find a way and close the deal at much lower rate.They were running from pillar to post and try to catch someone who has contact with Harshad Mehta so that they can talk with him and make a deal.The bears never let Teji to happen and whoever tried to go agianst them were slaughtered , so when Hrashad has his day it was going to be very difficult for bears to even talk with him.Harshad was the first person who made a BIG dent in the fort of bears.He came out like a LION.After his bullrun people started taking interest in Dalal Street otherwise Dalal Street was a BIG NO for a small person.Harshad Mehta showed what is the meaning of TEJI.What is called TEJI.He showed what happened where the prices can go in a BULL market.To me he was the pioneer of 1st Bull Market in India.Though he was a college drop out, he was very sharp and able to understand what is going to happen how he was going to deal with it.I know many people do not like him due to scam , but for ONCE he showed bears the HELL.He showed BEARS what the HELL looks like which these BEARS were showing to others! Can anyone imagine the scenario at Dalal Street at that time?Bears faces were dimmed and trying to scramble to even talk with Harshad Mehta to make a deal for their shorts in ACC? Dalal Street was overjoyed with Bears annihilated for the first time in decades.They were slaughtered for the first time.Harshad Mehta was a HERO.
One had to just imagine what should be scenario there.......
The word , "SKY IS THE LIMIT "only came after Harshad came on the floor.No one dared to speak, this sentence before Harshad came.
One needs to remember that Harshad Mehta was alone and against him was a whole lobby of bears.A catrel of Bears and to fight with them on each and everyfront was no mean an achievement.He has to play his cards very well otherwise with just one leak of information and Bears will attack him and he is nowhere.That they did at last.Find out where he is getting money and broke the castle which Harshad made.But I have great respect for Harshad Mehta and Ketan Parekh as well.They were real BULLS.Though their way of operating were not legal but they did it.Taking loans and receipts of crores of rupees and playing the game is not easy.It is a game of 100-200 or even 500-1000 cr game and more.
As I once wrote, keeping market in 20% upper circuit is no child's play which we saw in 2009 when election results were declared.
That is how Harshad Mehta broke the legacy of BEAR LOBBY.He was the first BULL of our market.Though his way of doing things were not correct but he once showed to the BEARS that they can't WIN and dictate the price of any stock at their WILL.
Many bears of that time has now turned BULLS and some are still there playing both the games still.They are BEARS at oppertunity and BULLS at different scenario that takes place.They change their stand according to what is happening in Int market and how BULL are palying their cards.But now we don't see permanent BEAR and that was the difference Harshad Mehta brought to our market.We have bull run as well as bear run.Otherwise in old days it was only bearrun and nothing else.
I remember people use to buy in certian months and sell in certain months.The profit was average 20% and these cycle use to come 3 to 4 times every year.The months were predecided.Buy in these months, sell after 2-3months  take 20 % and again buy after couple of months and sell.....
Some of the Bear operators has such a holding on Dalal Street, which was fondly known as, that they tell the Co Chairman whom to take as Director.He will sit with a wishlist and call CM or send message that keep this person as Dir or your Co price will be broken.Yes, that was how itr was.They even dictate when to give Bonus.They first corner the stock and then pressurize the CM to declare Bonus.Some one will go at the AGM of the Co and will openly pressurize the managemet to declare Bonus.
Those who are new in market do not know anything.You are all just a 1/1000 th percent of a drop in an ocean.Even now what is going on in market , many shouldn't be aware of but there is going on a BIG fight between BULLS and BEARS and each one trying to come one up against each other.It is a MEGA FIGHT BETWEEN BULLS AND BEARS.
These Bear Lobby tried to play with Riliance Ind and Dhirubhai Ambani taught them such a lesson that from there onwards Bears never touched Ril Ind.Bears tried to play the same game with Ril Ind short selling, and Dhirubhai dealt it with BEARS.
That story , about what happened can be read in a Book.I forget the name of the Book but if one will google one will definately find it.It is worth reading how Dhirubhai did it.
The fight between Bulls and Bears are not new in Indian Market nor is in International Market.
This will keep on happening but stock with great fundamentals one will get only in these type of situations.I have been going through the Bulk Deals everyday at bse site and I can say that many HNI's has to sell their holding due to margin pressure etc.
"No stock can go up without operator."
These is a very big sentence but it is true.Stock can never move up over 40-50% withour operator.It is not possible for investor to move a stock over 40-50%.If a stock is giving over 50% return in a year then operator needs to come in picture.The floating stock needs to get dried and there needs to be the paucity of floating stock.The counter then becomes almost dry and then the operation starts.
Hard to explain all these here.I am also not much aware of how things happens but just writing how it happens on my own assumption.
Market will bounce back.This is the fight betwen bulls and bears and nothing else.India is growing.....


  1. What a post Rajeev. You are really very good at explaining things. I would like to hear the name of that book regarding Dhirubhai Ambani.

  2. Partha and all,
    Keep reading this post again and again as I will keep on adding more in this post as I recall something like keep reading again and again this post....u will find some more info or my views.....

  3. Hi Rajeev,
    Once again an excellent post.
    As you know, I am a book-lover, I think I know the particular book you are mentioning, especially as it says its banned in India.
    Giving below the link

    With Regards,

  4. Hi Rajeev,

    What a superb post. In my opinion this is one of your top most post. For people like me who don't know the real history of Dalal Street you have opened a new chapter to learn. All people who read your blog are blessed to hear it from the horse's mouth. This post almost brought tears to my eyes.

    Please do keep posting such pearls of wisdom and stories of past whenever you have time.

    Once, again this is in my list of all time favorite posts of yours along with your posts on the element of luck in a person's life.


  5. Amazing post Rajeev. A true Kicker for all who are passionate about Capital markets & would like to explore how it all started & how things were being dealt with in earlier days. Surely i guess bulls used to get a kick when stocks used to move 5-10% per day in those days as bears were in full control. :-) . Your post has made me curious to study about the 2 big bulls Harshad Mehta & Ketan parekh. Will catch hold of the books & will start my study. Also will study about Dhirubhai Ambani too.

    Thanks once again for this enlightening post. Look forward for more such kicker of a post from you :-)

    Warm Regards,

  6. Rajeev,

    A nice write-up about bulls and bears. Most of the today’s investors are not aware of those events. I entered the secondary market one year before the Harshad Mehta’s scam. With your permission, I would like to add some more to your write-up.

    It is very interesting to know how Harshad got those huge funds to trap the bears. It is mandatory for every public sector bank to purchase some government bonds and these bonds are also traded on BSE. Harshad Mehta bribed the officials of some PSU banks and gave them ‘Banker’s Receipts’ only which are like ‘confirmation receipts’ given by the stock exchange member (broker) for the bonds the banks have bought. He did not 'deliver' the bond certificates as he did not really buy those bonds. His idea was to utilize the funds to buy ACC and to deliver those bonds later. With that money, he went on buying ACC in the forward market. His idea was okay because the prices of those bonds will not rise or fall unusually as they are interest-yielding bonds whose prices will be more or less steady. He did this after he discovered that the turnover in ACC counter was nearly 10 times the floating stock, the reason being, as you said, the bears were hammering it. In the forward market, the seller can delay the delivery of certificates for some settlements only; but not for ever. When Harshad had finally asked for the certificates to be delivered, the certificates available in the market were one-tenth of what the bears have sold. So in the auction conducted by BSE for spot purchase of ACC (in auction up to 10% excess is allowed by the exchange over the previous day’s closing price) to be delivered to Harshad, the share price went on increasing. After every settlement period, during auction, ACC went on rising, which in turn triggered the price in open market also because there were no physical certificates available.

    It is so funny to note that during those times, since there were no certificates available to be purchased in auction, Harshad sent some of his certificates (delivered to him in the earlier settlements) through his friends to be sold in the subsequent auctions at a higher price to earn more and more money. That is, in the beginning if had bought at 400, they would come for delivery first. When the auction was going on to settle those transactions which occurred at, say, 5000, he was using those share certificates which he got delivered at a price of 400. Though he can sell those shares in open market, as I said, in auction, he will get 10% excess, that too, cash on the spot. That was so clever of him, for a person, who dropped out of his college and never finished his B.Com. He sucked the blood out of bears dry!

    There were two positive outcomes of Harshad’s scam – Govt of India woke up and set up a body called SEBI and to counter the dominance of BSE, NSE was set up. Earlier, there was a body called ‘Controller of Capital Issues’.

  7. Hi Rajeevji

    I feel the kind of damage is getting done on Midcaps and small Caps, It will take some long period of time for investors to show confidence in them again. Even though its all game of sentiment but whatever rumours are engulfing the market these days its not doing any good. Read a cartoon where in A TV News Presenter is asking a market analyst as to which sector you see value in and analyst replies "SCAM".

    Your views Pls.



  8. Krishna,
    That was a very necely deciphered information.I can't write everything here...thanks for that....

  9. Thanks Vikas for posting the link, but the book I am talking is completely written on how Dhirubhai did it.It just covers that and nothing else but I remember there were 2 other story in it, maybe one of KP and other of HM.....I am also not sure whether that book is in English or Gujarati..

  10. Mr Rajeev,

    Their is no difference between terrorist and these so called govt probing agencies i.e SEBI , IB etc etc. If they really wish to stop these scamsters then why dont they arrest them or freeze those a/c without creating so much hype.We all know Indian system is based on corruption , each and every corner you find scam or corruption . When VAT is introduced I think govt may check every a/c but the fact is that in name vat big time theft is happening. Later Govt decalare it as scam.They sleep till every thing happened and executed well enough to give time to its executioner.

  11. sebi, ib and all burocate are pet dog of bahubali and criminal for small and innocent invester. even Blue channel of media misguide their viewer 24 hour.Any joker come in media and explain with smile face that buy xxx scrip at cmp its look sexy and it give U 100% return in a year this is hidden gem dont miss buy now(because my staff is ready to sell my holding and please give me exit) otherwise U miss the bus.
    i dont understand what is use of T2T segment in stock mkt if u not send operater or operater riging scrip in t2t.
    i never see any enquiry or criminal case against those scrip which come down from 4 digit to 2 digit (like sel mfg or koutton)or delist from stock exchange. why sebi allow any company come with any ipo at 500 which worth is not more than 50.
    if any scrip delest from mkt only shareholder suffer rest all enjoy.
    it may be possible sebi cheef also make huge money from bear cartel before his retirement.
    these all thing is only my personal view may be i m 100% wrong but all innocent invester look like fool after deewali and no one come to clarify as yet what is happen in mkt from last 1 month.

  12. Very True Ashok Ji, SEBI is part of the GAME

    Surprising how HM is now behaving like finance ministry using IB to spook his nose into stock markets by making them swing (no one can forget his Oct 2007 order on FII's and later sensex 21K)

    now brought back his old friend as SEBI chairman, So that friends can help each other

    All this drama is only to make sure the bear cartels can make maximum money....

    I still remember Ambarish Baliga recommended on CNBC "Buy Koutons, we are bullish on the business model" he said that when it was @ 110 zone....poor retail flocked to it...made it 128 in 2 days..... Koutons at a new 52 week low 45 (1/3rd of the price)

    Who will investigate all these? no one....its India...after BEARS make will be the turn of Bulls....again BEARS story goes on....

    All are in the GAME

  13. Link to the book


  14. Rajeev
    As much i as admire your skill to identify gems very early.. i think that your admiration for
    Mr Harshad Mehta is totally misplaced. Let's face the facts - he was a crook. He interfered with natural market forces, used illegal means to spike select stocks and in downfall , took a lot of small investors with him.

    Dont idiolize him like some kind of 'small investor saviour'. Au contraire - he was a thief - albeit a sophisticated one.

    Admiration is meant for honest investors like Warren Buffet, Graham etc.

  15. Ice,
    Again u r mistaken here.I never said what Harshad Mehta did was correct.What I emphasized was what he did with the bear cartel.
    I donno why people are so vary of Harshad Mehta?I have written in detial how bear lobby use to supress the prices and if someone tries to go against them what they use to do?Was that legal?Poeple has made sucide and lost their house and jwellery and bear showed no mercy to them.
    And remember one thing, these bear lobby were having peeple of their own in BSE exchange as well where they use to get the inside info what bulls are doing.Wasn't that illegal?
    Another thing to note is, though Harshad got money from Bank's receipt , on the D Day, he was ready with the cheques and was on his way to pay all the dues to the bank but bears somehow get him arrested through CBI and the bull run was aborted.
    Seems , you have not tried to read what I was trying to my post 2-3 times or even 4-5 times and try to understand exactly what I wanted to tell......

  16. Rajeev
    You didnt explicitly say it, but its very obvious that you admire Harshad and thats evident in your post.
    Just as two sins doesnt make a good deed, one cannot justify Harshad's acts just because he was up against a bear cartel who was manipulating the market.
    As far as Harshad paying up the banks, that was impossible. He held huge positions and when the market crashed, his net asset value also crashed.

  17. Ice,
    What do you want to prove writing such comments?That I accept that I am fan of Harshad Mehta?That I have already written in the post that I like Harshad Mehta and Ketan Parekh.But what u r trying to say or prove?
    If u admire me as a person who picks the gems early and if by admiring Harshad Mehta and Ketan Parekh , if u feel that I have lost the admiration for you or for any one else, then anyone has the liberty not to follow me....but what I am is what I am and you have to accept me that way........
    So next time don't write such useless comments and try to show me that whom I am admiring is not worth.....I have my own views......

  18. Dear rajeev

    Your post on the perennial TUG-OF-WAR between the bulls and the bears illustrated by the phenomenal bull run engineered by Harshad to beat the Bear Cartel at their vicious game is fascinating. It has given me a few insights on the market forces.
    I have shared it with family and quite a few friends. Thanks for bringing a slice of history lost to many of us. Also Thanks for illuminating Harshad's role in cracking the strangle hold of Bear Cartel over the Indian bourses.

    I have been seeing you for a few years starting with MMB. I am delighted to see that your passion for stock market is as deep and
    multi-faceted as the stock itself. I salute to your passionate interest in every aspect of stock market.

    Ice dear is wearing the judge's hat. He wishes to spare neither Harshad nor you....) Why must everyone have the same opinion of Harshad as his. Life is not made of Black and White. If one uses one's Grey Cells one can see Grey is the clour of Leela of Life. Anyway to each his Blinkers!!

    I am looking foward to more from you on this.

    Regards KM

  19. Hi KM,
    Long time I am seeing u back.
    Well,ICE or anyone needs to remember that for any bullrun money needs to come in CONSTANTLY.
    Without money a Bull run is never possible.Market always favours BEARS because when prices goes down everyone wants to SELL and hence that makes easy for BEARS to break the prices.Moreover in those days , when there was badla system,bears use to make a cartel and shortsell stocks in huge quantity and so to counter that BULLS will have to bring money to buy everything they wants......
    One needs to understand the complexicity of the market ,how it is played and what players have to do.

  20. Dear Rajeev

    I come by every now and then, but find it difficult to post in absence of a google account. I found your post on Harshad such a great delight that I felt the need to write and communicate my gratitude and appreciation.

    Warm Regards Always. KM

  21. KM,
    Do u think it is a big deal to open a google a/c?.....