The stock market crash of 1982 in India is not considered a major event in the country’s financial history. However, there was an interesting incident involving Reliance Industries during that time.
In 1982, the shares of Reliance Industries, a prominent Indian conglomerate, were trading at around Rs. 131. Within a short period, the share price dropped to Rs. 121. It is important to note that during that period, the stock markets had a 14-day settlement period. This meant that investors could buy and sell shares during this period and treat it as an intraday trade in today’s terms. Consequently, many traders engaged in short-selling, expecting the price to fall and then buying the shares back within the settlement period to book a profit.
During this time, there were bear cartels active in the stock market. These cartels would target specific companies, short-sell their shares to drive the price down, and then buy them back at a lower price to make profits.
The drop in Reliance Industries’ share price was due to one such bear cartel short-selling around 11 lakh shares of the company. However, Dhirubhai Ambani, the founder of Reliance Industries, recognized the potential impact on small investors and the reputation of the company. To counter the bear cartel’s actions, Ambani rallied brokerages that were known as “Friends of Reliance” and asked them to start buying Reliance shares.
The move resulted in a significant increase in buying and selling of Reliance shares during the settlement period. At the end of the settlement period, the “Friends of Reliance” asked for the delivery of the shares sold by the bear cartel. However, the cartel didn’t have the shares, and Ambani refused to allow the stock markets to open until the trades were settled. This led to the stock markets remaining closed for three consecutive days, disrupting trading activities.
While the 1982 incident involving Reliance Industries was not a full-fledged stock market crash, it was a noteworthy event that demonstrated how influential market participants like Dhirubhai Ambani could take control of a situation to prevent manipulation and protect the interests of small investors.