Architect of chaos: Harshad Mehta and the price of reform

Subscribe to enjoy similar stories. In July 1991, India dismantled the four-decade-old Licence Raj and embraced economic liberalization. Over the next few months, as unprecedented foreign capital poured in, a peculiar euphoria gripped the nation.

The Sensex surged from around 1,000 points in mid-1990 to 4,091 by March 1992, delivering over 300% returns in one of the index's most spectacular rallies. Prompted by charismatic brokers who seemed to possess a Midas touch, first-time investors, including taxi drivers, paan wallahs, salaried employees, and shopkeepers, poured their life savings into stocks. Harshad Mehta was the poster child for this new India.

But all too soon, he also became its cautionary tale. Born into modest circumstances in Gujarat in 1954, Mehta cycled through odd jobs, including selling hosiery, cement, and insurance, before finding his calling on the Bombay Stock Exchange (BSE) floor in the early 1980s. What distinguished him was an ability to read market psychology and exploit information asymmetries that were, at the time, perfectly legal.

His transformation from a bear to a bull also marked the transition of the Indian markets from the old order to the new. In 1986, veteran bear operator Manu Manek (aka the Black Cobra) and his cartel targeted Mehta by heavily short-selling shares of SPIC—a company Mehta was heavily invested in—driving its price down. Rumours spread that Mehta owed over a crore to the exchange and was going bankrupt.

To protect his reputation, Mehta paid off all his dues 14 days early, taking a personal loss of ₹1.5 crore in the process. By the late 1980s, he had become the Big Bull, his very interest in a stock enough to send its price soaring. With the opening of the economy and