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Bulls, Bears and other Beasts by Santosh Nair

Early Days

Lalchand Gupta, or Lala as he was lovingly called by his friends, was born into a poor family who barely managed to make their ends meet. He had fallen into bad company early in his teenage years and had grown to be rebellious and violent. His constant need to get into brawls drove his father to move out of the chawl they lived in and move into a new place. When Lala was in the twelfth standard, his father had met with a terrible accident at the factory that had rendered him unfit for work. The financial responsibility had then fallen on Lala's shoulders and he took up some meagre jobs. But nothing seemed to satisfy him. Fate made him bump into Pradeep Mohan, one of his classmates in college, and they started keeping in touch after that. Pradeep worked in the back office of a stockbroker and he maintained the client records after the trades for the day were done. Hearing Pradeep prattle about the happenings of the stock market and how fortunes were made and lost in a minute, to say that Lala was fascinated would be an understatement. Lala realised that he did not need any fancy degree or even formal education to make a fortune in the stock market. Skill, perseverance and luck was all that he needed.

 

After about a month of hearing him babble about the wonders of the market, Lala asked Pradeep to arrange a job for him too. Although Lala wanted to be in the midst of all the action on the trading floor, shouting orders left and right, he knew that he had to start small. Pradeep managed to get him a job at a lesser known firm and warned his friend not to be reckless. In the dying days of 1988, awareness about investing in shares was on the rise. Other than the brokers, the main players in the market were institutions like Unit Trust of India (UTI) and Life Insurance Corporation of India (LICI). Brokerage rates were a grand 1.5% at that time. Investment based on the fundamentals of the company was still on the down-low. Lack of sufficient publicly available information was the main reason behind this. A lot of what passed as 'research' in those days, constitutes 'insider trading' today.


Reliance Industries, Bajaj Auto, Castrol, TISCO (Tata Iron and Steel Corporation), Tata Tea and Tata Chemicals were among the most actively traded stocks of those days. Nemish Shah, Manu Manek and Ajay Kalyan were the high rollers back then.

 

By working in the back office, Lachand began to learn exactly who was buying and selling what shares. This information proved to be useful to him as some of their clients were important players in the market at that time. Lala tried to make friends from other brokerage firms early on as he knew the importance of networking. Soon, Lala was promoted to be a dealer in the trading ring. There was a public address system on every floor of the stock exchange building, on which the prices of A group and B group stocks were broadcasted. In the evening, the stock exchange would publish the bhaav copy, a report which listed the high, low and closing prices of the stocks traded on that particular day. After the trading hours, there operated an unofficial market called the 'kerb market' for some of the more liquid stocks. Of all the players in the stock market, it was the "jobbers'' that fascinated Lala the most. A good jobber needed the skills of a trained psychologist and he aimed to make a series of small profits rather than a huge profit through one giant trade.

 

The trades done on the floor had to be written in the sauda pad. Each sauda pad had five columns for noting down details about the deal. These were - the clearing number of the broker through which the deal was done, whether the shares were bought or sold, the name of the stock, the quantity of shares and the price at which the deal was done.

 

Lala had soon become good friends with Bunty who worked in a non-banking finance company. Bunty would come to Lala in need of information about various jobbers, brokers and dealings that took place in his firm. Lala would provide it to him for a hefty amount. Bunty had realized that Lala was smarter than he had thought and believed that he would go really far in the stock market business.

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