The Turn Of The Bulls

Relentless selling by the FIIs had driven the Sensex to fall below 9,000 and the Nifty below 3,000 by October 2008. The indices were crumbling under the weight of panic selling. Some people were even talking about the demise of equity investment. Although Lala had made a fortune by going short on the market, there could never be any real winners in a bear market.

Across the world, central banks and governments had started to take steps to halt the rapid slide in their respective economies. In India, many brokerages had started to lay off employees. Lala's experience had taught him that behind the market stoicism operated a desperate government that wanted to ensure that their markets send out an "it's business-as-usual" signal to the world.

In January 2009, Ramalinga Raju the founder of Satyam Computer Services had written to SEBI and the stock exchanges and had confessed that he had been cooking the company's books for the last couple of years by showing non-existing revenues and bank balances. A total of 34.67 Cr shares of Satyam were traded on both exchanges on the same day. 

However, Satyam's advisor had soon stated that it was terminating the assignment as the company was not forthcoming on certain crucial disclosures. The entire incident only reinforced the popular belief - that only the promoter of a company really knows what goes on inside a company. The Satyam incident had investors worried about more such frauds surfacing and it cast a shadow on the shares of the remaining IT companies. The scam also gave a blow to India's claim about having the best corporate governance standards among the emerging markets.

For all his market wisdom, Old Fox, one of the astute traders of Dalal Street, had begun to overplay his hand without realizing it. By 2009, the market had started climbing up again. Old Fox had kept selling even as the trend had shifted from bearish to bullish. A large number of HNIs and promoters who bought shares through fronts had entered the market. Lala continued to increase the size of his trades and watched profits pour in. In May, when the UPA had returned to form the government, the Sensex rose to a whopping 14,284. By July, many companies decided that the market conditions had become suitable for another round of fund-raising through QIPs. They tried their usual tricks, for instance - they got market operators to bump up the stock price just before bids were sought from the interested buyers.

The severe bear run had brought about some changes that were hard to reverse. It had exposed the fragile business models of many companies, mostly those in the infrastructure and real estate sectors. Many of them never regained the fancy of institutional investors. For brokerages, the days of juicy commissions and brisk business were over. The bear market of 2008 had brought the high-flying promoters of numerous mid-cap companies down on their knees.