The Securities & Exchange Board of India has undertaken an investigation to ascertain how big a role was played by former Big Bull Harshad Mehta in the recent turmoil at the country's capital markets.
The investigation begins with examination of the books of the brokers who are seen to have been active in the so-called Harshad scrips, whose prices are said to have behaved abnormally in the last few weeks.
"The market has sky-rocketed and dipped. But has this happened due to Harshad Mehta? We have to find out to what extent Mehta has been responsible for the abnormal behaviour of the Indian capital markets. We will look into all the factors," said sources in the market regulator.
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When asked why the market regulator could not prevent Mehta from influencing the markets, a Sebi official admitted that the markets regulator faced constraints since Mehta was not in direct contact with the market.
As part of its efforts, Sebi has been watching the price movements in Videocon, Pentafour, Satyam Computers, BPL, Sterlite ACC etc _ which have come to be referred to as the Harshad scrips _ to see if there has been any price manipulation.
Another possibility the markets regulator is looking at is that the recent turmoil may have occurred entirely on account of extraneous factors like the East Asian crisis, the falling yen.
No concrete proof exists that Harshad Mehta was the one driving up these stocks or for the predicament facing the handful of stock brokers who bought in them.
One of the theories doing the rounds of market circles is that the entire operation has been the handiwork of a bear cartel determined to teach the Big Bull a lesson. Two leading operators, who usually thrive in bearish conditions, helped by foreign brokerage, are reported to have engineered the process in the first 10 days of this month.
The unfortunate part is that a lot of brokers and small investors have been caught in the cross-fire and have lost huge amounts.
Mehta's presence has been felt on Bombay Stock Exchange ever since the Sensex rose to 3,200 in January this year and rode a four-month bull run to touch 4,280 on April 21, 1998. BPL rose from Rs 87 in January to a high of Rs 449 this months, while Videocon jumped from Rs 35 to a high or Rs 173. Even the bluest of the blue chips like HLL an Castrol could not achieve this kind of appreciation in the last two years despite goods results.
But the Harshad phenomenon did not last very long. The brokers who bought the stock could not cough up the money for them, especially in BPL, Videocon and Sterlite, as the market fell.