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Commentary

MV Chronicle: Ambani Shuts Down the BSE and more…

In the latest MarketVision Chronicle (Feb 19 2011): Read about how Ambani shut down the BSE for a couple days in 1982, and all else at MarketVision.

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Ambani Shuts Down the BSE


In the newsletter last week, I mentioned this story and got a few requests to expand. So here goes. The story draws heavily from Gita Piramal’s Business Maharajas and Hamish McDonald’s The Polyester Prince.

March 18, 1982. The Reliance scrip was falling. Down from 131 to 121 in minutes, large blocks of shares were hitting the market and that was destroying the price. Engineered by a “bear cartel” that involve influential Calcutta industrialists, the shares prices of key scrips like TISCO (now Tata Steel) were also hammered down. The idea was simple: You sell shares. And when the prices go down, you buy them back. The concept of short selling, and in particular, naked short selling.

In that fateful month of March in 1982, the bear cartel shorted and took down a number of stocks. They sold 11 lakh shares of Reliance short. The cartel was powerful – it had its grubby hands everywhere – and was known to take down companies when it wanted. Yet, they didn’t know what Dhirubhai Ambani had in store.

He bought the shares that were being dumped. Not directly, but through known brokers, more than 800,000 of the 11 lakh shares were bought by Ambani. This carried on for a while, and the share zig-zagged. Then came Friday, April 30, 1982, a settlement day, when the price of Reliance was 152. (Wikipedia) The bear cartel wasn’t worried; they would simply do unbadla and roll the trade over. Dhirubhai’s brokers demanded the shares, and put up the money; and asked for a Rs. 25-50 unbadla charge, which was ridiculously high.

 

At MarketVision


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All You Need to Know About Why Things Fell Apart: Michael Lewis – Bloomberg

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Keep mouth shut…(Subramoney)

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Do read and let me know what you think!