Harshad Mehta was a prominent Indian stockbroker and trader who became known for his involvement in the Indian securities scam of 1992, also known as the “Harshad Mehta scam.” His trading strategy, which played a significant role in the scam, involved several key elements:

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1. Price Rigging: Harshad Mehta manipulated the prices of certain stocks by using a combination of circular trading, which involves buying and selling the same shares to inflate their prices artificially, and spreading misleading information about those stocks to attract other investors.

2. Borrowing Funds: Mehta borrowed substantial sums of money from banks and financial institutions using fraudulent means, such as using fake bank receipts and forged documents. These borrowed funds were then used to invest in the stock market, further inflating stock prices.

3. Stock Price Manipulation: Mehta often targeted a specific group of stocks, often referred to as “Group A” stocks, which were known for their liquidity. By buying large quantities of these stocks, he could artificially drive up their prices.

4. Pump and Dump: Mehta’s strategy involved pumping up the prices of certain stocks, attracting retail and institutional investors, and then dumping those stocks at inflated prices to make a significant profit.

5. Collusion: Mehta collaborated with several bank officials, brokers, and other market participants to carry out his trading strategies effectively. These individuals played a crucial role in facilitating his stock price manipulation.

6. Market Circulars: Mehta used false or misleading market circulars and rumors to create a buzz around certain stocks, luring more investors into the market and driving up demand.

It’s important to note that Harshad Mehta’s trading strategy was illegal and unethical. His actions ultimately led to significant market disruptions and financial losses for many investors and institutions. Mehta was later prosecuted for his involvement in the securities scam and faced legal consequences.

In any legitimate financial market, engaging in such activities is not only illegal but also harmful to the integrity of the market. It’s essential to adhere to legal and ethical trading practices to maintain the trust and fairness of financial markets. If you’re interested in trading or investing, it’s advisable to do so within the boundaries of the law and with a focus on risk management and responsible investment strategies.

By smartblog91.com

I Am An Indian Blogger I Write Interesting Blogs Related To Trading And Finance

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