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    harshad mehta scam

    Introduction to the Harshad Mehta Scam

    The 1992 stock market scam is often referred to by the perpetrator’s name who brought about the downfall of the stock market: Harshad Shantilal Mehta. The scam featured an embezzlement of Rs 1439 crores ($3 billion) that led to a severe crunch and drastic loss of wealth in the life savings of many 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 figures. However, it remains true that Mehta exploited the loopholes for his personal benefit, manipulated the market and was heavily involved in many banking frauds.

    Understanding Harshad Mehta Scam

    In a country broken under major political and policy based economic reforms with the liberalization, privatization and globalization (LPG) process of opening the economy to the world, Mehta thrived and was rich beyond the existing standards. Mehta had what people could consider a rags to riches story: from being a mere immigrant to the city to becoming a renowned stock broker in BSE. He was called the ‘Big Bull’ after resounding success with his Grow More Research and Asset Management firm after many a series of odd jobs. He owned shares of Associated Cement Company (ACC), which saw an inexplicable surge in price from a mere Rs. 200 to a Rs. 9,000. Mehta justified that the stock had only been undervalued all along, prompting a market wave of investors flocking to his investment choices. The bandwagon, coupled with the broken financial system that was beginning to find its foothold in the country that Mehta saw his benefit in, led to the market’s downfall. The key reasons why Mehta is held accountable for crimes is due to his heavy involvement in market manipulation, exploiting the loopholes of the banking system, embezzlement etc.; he was convicted for 23 crimes, but he died in prison after being charged for only four.

    Highlights of Harshad Mehta Scam

    The key instruments used in the great scam were stamp papers, bank receipts, ready forward deals, and higher 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 overly luxurious lifestyle. As valued in 2019, the Harshad Mehta scam had swindled nearly Rs. 250 Billion from the banking system. The effects of the scam, while not persisting directly, still affect the conservative investors’ mindsets. Ketan Parekh, an associate working under Mehta, would later go on to reanimate a similar crime in the stock market in 2008 and be convicted for his involvement in market manipulation in 1992.

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