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Dhirubai Ambani and the Kolkata bear cartel

“The Black Cobra of Dalal Street” is a name you might recall from the Scam 1992 series which undoubtedly many of you would have enjoyed. Yes, the ultimate bear in the story who could sway the markets with his bearish short-selling techniques and the one who goes head to head with the Big Bull- Harshad Mehta.

Dhirubai Ambani and the Kolkata bear cartel | FIC Hansraj
How Dhirubai Ambani beat the Kolkata bear cartel

Real name, Manu Manek was such a powerful personality in Indian bourses that even directors of companies listed on the stock market were made at his discretion. Such a legendary personality was he, that bulls we know today, like Rakesh Jhunjhunwala, RK Damani, Raamdeo Agrawal have all been his proteges at one point of time!

After such a mention to the Black Cobra Manu Manek, it should be evident that he’s the one in the picture here, this time not with Harshad Mehta but with the founder of India’s largest conglomerate Reliance Industries- Dhirubhai Ambani, an intriguing case which led to the closure of BSE for 3 days!

It was April 1982 and the stock market, namely just the BSE in India, was very different from what we know of stock markets today. At that time, there existed a 14 day settlement period, unlike T+2 today. So, for any number of trades done within this 14-day window, no payment or delivery of shares would accrue till the settlement day. Effectively, one could short this Monday and buy back them next Monday, nobody would ask for payment or delivery in the interim, quite similar to what we know today as intra-day.

Before proceeding ahead let’s decode the concept of shorting, what if we told you that you can sell something today and buy it back later so that ultimately the sale happens first. You might wonder if you don’t have it in the first place, how do you sell it? That’s what’s called a short sale. A short sale means you don’t have it or you are short of that stock.

Margins given to the exchange are a thing today but the 1980s markets were more broker managed and the big players in the market would leverage their friendships or the trust between these players for huge leeways. Accordingly, shorting lakhs of worth of shares at that time was possible for big players without even paying a penny!

Dhirubhai Ambani Vs The Bear Cartel | FIC Hansraj
Bear Cartel

Manu Manek was a pro at exploiting this through his Bear Cartel, known to short shares. They would come in and short one company’s stock and that share would get hammered by the selling pressure they would create. So, back to the story, what really happened was that this cartel shorted around 10 to 11 lakh shares of Reliance and the share price plunged from Rs 131 to Rs 121 in just a matter of hours. This strategized move came on the same day when Reliance’s right issue was to open for subscription and the cartel suspected that the management of the company was artificially inflating the price to ensure a full subscription to the right issue.

So, the cartel had effectively brought the share price down from Rs 131 to Rs 121, and with 10 lakh shares of Reliance, they have made one crore by earning that 10 rupees per share. Well yes, but it’s only possible if you can buy back at Rs 121.

The problem really, in this case, was a bear cartel was successful in bringing the price down but Dhirubhai Ambani was smart and had acumen enough to tackle the Bears. He was quick enough to realize that if this bear cartel was allowed to go on, they would take the share price down to whatever they wanted. This would create a panic situation in the market with extreme selling pressure. In this complete process, Ambani wouldn’t lose because he was not selling his shareholding. The small investors who would get influenced by this selling pressure trend would lose money as well as their faith in Reliance.

However, something unexpected happened. This was when Ambani brought into the picture “The Friends of Reliance” in the market then. A buying wave began in favor of Reliance. The more the bears sold – the numbers got to 11 lakh shares – the more the investors picked up from the market. Eventually, they bought more than 8 lakh shares sold by the bears. This left everybody bewildered on who was buying Reliance shares and from where did the money come. These “Friends of Reliance” went on to buy around Rs 10 crore worth of Reliance shares.

A point to remember here, that no one in the market is actually paying up for all this at the moment with the settlement days almost 14 days ahead. So, fast forward to the settlement date, the bear cartel which had shorted the stock had to either deliver those shares or pay something called an “undha badla”, in a case they did not have the shares required for delivery, to carry over the transaction to the next settlement date.


This badla was a charge per share to carry forward the delivery of required shares to the next settlement date, kind of a credit of 14 days.

The settlement date arrived and the buyers, here “Friends of Reliance” demanded delivery of shares that the bear cartel had shorted. Alternatively, in case the bears didn’t have the shares for delivery, the buyers demanded a “undha badla” of Rs 25 per share, indeed an act of revenge if not for an exchange!


The tables were turned and the exchange went into a crisis. The BSE was closed down for 3 days to understand and then solve what really had happened!

The negotiations continued for this duration and the markets opened once again. This time Reliance peaked at Rs 201 with the bears scrounging for shares ultimately driving up the prices to fulfill their sale.

Well, it remains a normal victory of acumen over the bear cartel only if Dhirubhai Ambani himself wasn’t routing shares to the Bears at these peak prices!

Rumors have it that Ambani earned a fortune by routing his shares at this price when they remained high due to consistent buying by the entrapped bears and got them delivered back to him at the negotiated price of Rs 150 including badla!

Can there be better revenge?