Bulls, Bears and Other Beasts Page 11

  ‘Everybody here is robbing in some way or the other; the only difference is that some do it in a sophisticated manner,’ he would say.

  Lucky was aware of his limitations, perhaps the reason why he was so focused in the way he went about things. He was a good storyteller and I enjoyed the tales from his days as a struggler in the industry.

  ‘ . . . so there was this elderly fund manager in one of the PSU insurance firms. For some reason he took a liking to me and gave me orders occasionally. That helped me survive in my first job. But there was a price to pay for this kindness even though this gentleman was a much better person than some of his peers at other fund houses. As a token of gratitude, I decided to buy him a fancy bedcover from a friend who dealt in them. It was a beautiful piece – lovely embroidery on fine material – and every bit worth the Rs 1,500 I paid for it. The fund manager initially turned down my present, citing company rules. But when I opened it to show him the design and the feel, he was impressed.

  ‘Still, he maintained that his principles would not allow him to accept expensive gifts from brokers. I lied to him that it was not expensive at all. “I got a very good deal from my friend who deals in export seconds; only Rs 600, sir. That is not very expensive.” He accepted the gift and I was happy he liked it. But my happiness evaporated the following day when he called up saying his wife liked the piece so much she now wanted to present similar pieces to her parents and relatives who were coming down the following week.

  ‘He asked me, “Can you arrange for three of them for me, Lucky? I will pay you tomorrow itself.” I was caught in a web of my own making. I could not tell him the true price of that piece. I arranged for three more pieces; the fund manager never paid the Rs 1,800 he had promised. I consoled myself that it was a good investment to make. I thought I could expect more orders from him later, but that did not happen either. The following year, he told me that his nephew, an LIC salesman, was falling short of his annual target. “Are you insured?” he asked me. When I told him I was not, he suggested that I buy a policy. And without even asking me, he dialled his nephew saying he had a customer for him. It was obvious that I had to buy a policy from his nephew, whether I liked it or not. Those two episodes taught me the truth in the saying that there are no free lunches; and even if there are, they are not served on Dalal Street, for sure.’

  It was not that I was completely disinterested in what the big foreign funds were doing in the market. But I considered it an act of betrayal to front-run trades that were disclosed to me in confidence. I was well networked with dealers at the foreign broking houses, and I had a fairly good idea of the trades the foreign funds were doing. Occasionally, dealers would tell me about their big orders as it boosted their ego.

  Because of their large size, buy and sell orders of FIIs influenced share prices. The operators had by then cosied up to the important fund managers, and also had friends among dealers and sales people at foreign brokerages. It was crucial for operators to know what the foreign funds were up to, as their large trades could swing prices either way. Usually, the predators got wind of the big trades and made a killing on them.

  Although regular contact with dealers at foreign brokerages afforded you a fair idea of the important deals in the market, you still did not have the complete picture. You might know about a big sell order for a stock at one of the brokerage firms. But there could be a bigger buy order in the same stock at another firm. So, if you only had knowledge of one sell order and short-sold the stock, you could be forced to cover at a loss when the other broking firm punched in its buy order.

  As a rule, I never tried to make profits on deals where I had been approached to find a buyer or seller. I remember GB’s reply when I asked him what it took to make a lot of money in this market:

  ‘Skill, common sense, patience, inside information and, most importantly . . . ,’ he paused to trace out an imaginary circle at the centre of his forehead with his finger, ‘kismat . . . it must be in your destiny to make money.

  ‘It is something like this . . . you could be sitting in the lap of the most powerful operator, and he may well punch in your trades before his. But if some disaster were to hit the market at that very moment, you would still end up losing money despite the operator’s generosity.’

  Broking houses had tried to introduce checks and balances to ensure that client orders were not leaked. All phone lines in dealing rooms were recorded since crores of rupees’ worth of shares were bought and sold on verbal communication. The use of mobile phones in the dealing room is banned. Yet, even the best of systems is vulnerable to the ingenuity of the human mind.

  Big brokers and market operators had multiple landline connections, even during the pre-electronic trading era. The arrival of mobile phones did not do away with the need for so many lines. In fact, the multiple lines came in quite handy for trading based on confidential information.

  Much of the institutional activity happened in a dozen odd pivotal stocks like RIL, SBI, Tata Motors, Tata Steel, ITC and a few others, since these scrips were quite liquid. Each telephone line corresponded to a particular stock. If a dealer wanted to pass on information about an order in a particular stock he would dial a particular number, wait for the phone to ring a few times and then disconnect the call. There would be no conversation. Two rings meant a buy order and four rings a sell order – or the other way round. After a pre-decided interval, there would be another round of rings on the same phone to indicate the quantum of shares that were to be bought or sold.

  But this arrangement was not reliable beyond a point. So operators and dealers/fund managers devised code words to share information through what appeared to be innocuous conversation.

  There was this trader who was known to friends and associates in the market as Tyson, as he resembled the champion boxer in looks and physique. Tyson was well networked with most of the dealers at the foreign broking houses. They would pass on details of their trades to him before executing them. Tyson would then take positions in those stocks, for himself and for his informants. He would give them their share of the profits in cash. The code language was quite ingenious and even if the dealer was suspected of leaking information, it would be hard to prove the charges in a court of law.

  Tyson was thick with Prakash, at whose place Tyson used to trade. Because he was so close to Prakash, I too got along well with Tyson. One day I was at Prakash’s office when Tyson walked in saying he wanted to buy a big block of shares. Prakash asked him which stock he intended to buy.

  ‘I will know in ten minutes,’ he said.

  After ten minutes, his cellphone rang. The conversation lasted barely a couple of minutes.

  ‘Between 3.30 and 4.00, is it? Okay, tell Michael I will be there at the appointed time to collect the papers. Just in case I miss him, when can he make it next? Okay, tomorrow five o’clock, is it? Fine then.’

  As soon as the telephone conversation was over, Tyson placed an order for 50,000 shares of Satyam Computer Services. In less than half an hour, Satyam shares rose by Rs 10. Tyson promptly sold out his position. I had no doubt that Tyson had received the tip during the course of the conversation he had on his mobile phone just before he had placed the order.

  ‘So, what is it with Michael and the papers?’ I asked, not really expecting an answer. I knew him well enough to take the odd liberty with him. Tyson winked but said nothing. A couple of days later, over a drink, he told me about the code.

  ‘The time I mentioned represented the last three digits of the BSE code for the scrip, Satyam Computer in this case. The exact code is 376, a number between 350 and 400. The dealer friend of mine had told me the previous evening that he was likely to get a big order for Satyam.

  ‘When he got the order, he confirmed it to me over the phone, saying that Michael would come over with the papers. Michael here refers to a foreign fund house. If the buyer were a domestic mutual fund, the code word would have been Gopal. I then inquired about the order size indirectly, by askin
g when he would next make it in case I missed him today. My contact mentioned five o’clock, meaning 5 lakh shares. If we had been discussing a sell order, he would have asked me to come over and collect the papers from Michael.

  ‘Obviously, we cannot use the same message every time. At other times, we discuss common friends during the conversation, with each name corresponding to a certain stock. The order size is mentioned in terms of the day of the week or month of the calendar. “I will meet Rohan next Wednesday” means the dealer has a buy order of 4 lakh shares in a particular stock. If he says he won’t be able to meet Rohan next Wednesday, it means he has a sell order of 4 lakh shares.

  ‘On other days, the code could be the name of a movie, with the names of the actors corresponding to certain stocks. If the dealer says he liked the role of a certain actor, it meant a buy order. If he says the actor was disappointing, it means a sell order. We could be discussing the timings of local trains, or even a game of cricket. A person overhearing the conversation would not have the faintest clue that we were actually discussing stocks and the orders of clients,’ Tyson explained.

  It was not too difficult to know which dealers or fund managers were on the take. It was a small world, and word soon got around. Besides, it also showed up in their lifestyle at some point. On a good day, you could easily make a few lakh rupees in an hour. And if you had a few good months in a year, you could make enough to maintain a comfortable lifestyle for the rest of your life.

  The information channel I wanted to create was different. If anything, it was quite ambitious. If I spoke to, say, a dozen dealers at big broking firms, I would get to know of most of the important deals. Sometimes dealers would suppress information if they had pending orders to be executed the following day. And rarely would you get to know the name of the client, which to me was important, because the pedigree of the buyer also influenced the short-term trend in a stock. Big fund houses held their shares for longer than lesser-known funds, which were happy to sell out for a small profit.

  My quest was for a system by which I got the maximum information by speaking to as few people as possible. I soon found the solution.

  Every institutional investor had a custodian that handled shares and payments for them. At the end of the day’s trade, the brokerage would send the contract notes containing the details of trades made by their clients to the client’s custodian. If it was a buy order, the custodian would then release funds to the clearing house of the stock exchange, and if it was a sell order, it would deliver the shares.

  The contract notes were hand-delivered by the broking firm’s peon to the custodian. Some traders had already managed to bribe the peons at the big brokerage firms to show them the contract notes before handing them over to the custodian. At times the peons would make copies of the contract notes and pass them over to the traders. But this system had its complications. The broking firms did not always send their contract notes through the same peon. It was not possible to manage all the peons in broking firms.

  There was a solution to this problem too. The FII activity data from all custodians had to be finally filed with SEBI. If I could manage to befriend somebody in the FII department, all the important deals would be at my fingertips. It took me nearly three months, but using my friends-of-friends networks, I finally managed to crack a low-ranking official in that all-important department. I was now set for the big league, or so I thought, since nobody could have the kind of data I would have access to.

  The SEBI records did not mention whether the trade was a ‘buy’ or a ‘sell’; instead, it mentioned ‘1’ against a buy trade and ‘2’ against a sell trade. The 1-2 data, as it would be known in market parlance after some months, was the most sacrosanct of all data on FII activity.

  I used to pay that official Rs 5,000 every month for the information. I mentally named him ‘Mouse’ because he would dig out information whenever I requested him to. Our deal was that he would pass me information on a few important trades every day and on certain deals that I would specifically ask for. I never told anybody where I was getting my information from, not even GB or Prakash, the two people I trusted most.

  One day, Lucky offered to take me out for a drink in the evening. He suggested White House at Tardeo. I agreed, more out of curiosity than anything else, having heard about that place from so many fellow traders.

  The place was dimly lit, but not too crowded for that hour of the evening. We took a table very close to the dance floor where a bunch of overdressed and over-made-up girls were swaying to a 1980s hit number. Lucky called for drinks, and changed a couple of hundreds for crisp tenners to be fired away at the dancers. A few patrons glanced at me, perhaps trying to size me up. Call it my imagination or nerves, but I felt everybody was staring at me. I had been to many bars, but this was the first time I had set foot in a dance bar.

  One person looking my way struck me as a market operator Lucky had been pestering me to meet, but whom I wanted to keep away from (it turned out he was not that operator, it was only my imagination). I don’t know why, but I was suddenly seized with the fear that Lucky had got me to this place to blackmail me later on. I recalled his persistent offers to me to join the syndicate he was part of, despite my repeated refusals.

  Some months before, after he had downed a few pegs, he had put his arm around my shoulder and said: ‘You are my true friend, Lala . . . if anybody ever tries to fuck around with you, just let me know. I shall fix him.’

  ‘How? By getting him beaten up?’ I had asked.

  ‘No, that will only inflict momentary pain. I have something more lasting. I know people who will have that fellow photographed nude alongside some whores; after that he will be at your mercy forever,’ he said, laughing. It was a sinister laugh and made my stomach churn a little. I was not sure if he meant what he had said but I could not dismiss his claim outright. After all, he was known to be well connected to the high and mighty in the market.

  Sitting with him now, I suspected that Lucky may have a similar plan for me. He was a friend all right, but a pretty ruthless person, as I had realized in these months that I got to know him better.

  ‘Let’s leave and go to some other place,’ I told Lucky.

  ‘So soon? We have just come,’ he said.

  I persisted.

  He was amused. ‘Okay . . . but let’s have some fun before that,’ he said.

  I shifted in my seat uneasily.

  He then gave me a rundown on some of the girls on the floor.

  ‘That one in pink there, she is the favourite of a respected businessman who has trouble getting his thing up. His fondness is for money more than women. But somebody introduced him to that girl, and since then he is a regular in this place,’ Lucky said, winking ‘ . . . but I am not going to reveal who that businessman is.’

  I didn’t even want to know. All I wanted was to get out of that place.

  Sensing my indifference, Lucky then said: ‘I shall show you somebody who will just blow you over,’ and beckoned to a very attractive girl, who would not have been more than twenty-two or twenty-three.

  ‘Payal, I want you to meet my friend Lala,’ Lucky said.

  ‘Hello,’ she greeted me with a warm smile. I could sense that this girl had some class about her; she was definitely not the run-of-the-mill type.

  ‘Our friend is a bit shy, why don’t you liven him up a bit,’ Lucky told her.

  ‘Sure,’ saying which she moved to the dance floor and began swaying to the number that was playing. I tried hard not to look in her direction, but when I stole a glance I saw that she was casting seductive glances at me.

  Lucky handed me a bundle of notes. ‘Here, hold this in your palm and fire it away with your finger in the direction of the girl you like. If you want to, you can go right on to the floor and shower it on your favourite,’ he said.

  ‘I am fine, why don’t you throw it on my behalf?’ I suggested.

  Our drinks had come by then. I took a couple of sips, trying to l
ook away from the dance floor.

  ‘Look there,’ Lucky tugged at my elbow a couple of minutes later, ‘Payal is now wearing a different dress. She has taken the trouble to change . . . all for you . . . some effect you must have had on her . . . she is looking at you seductively from time to time . . . what is wrong with you? You are simply ignoring her,’ he said.

  ‘Look, Lucky, I just want to leave this place,’ I told him firmly.

  He stared at me momentarily and said: ‘Okay, I give in. But let’s at least finish this drink.’

  ‘Promise?’ I asked.

  ‘Of course,’ he said.

  I took my glass and drained it in a few gulps.

  ‘There, I have finished my drink. Come, let’s leave,’ I said.

  Lucky was dumbfounded.

  ‘You are in some hurry, I must say . . . but be a little patient and let me finish my drink,’ Lucky said. He took ten minutes to finish it.

  As we rose to leave, a waitress (no doubt a retired dance girl now past her prime) asked Lucky for a tip. He reluctantly gave her Rs 50. I thought that was rather cheap. The waitress stood there, looked at the money in her palm and then at Lucky, expecting him to be a bit more generous. Lucky ignored her and had begun to walk away when the lady told him that the tip was too low. This infuriated him. He looked at me and said, ‘Saali . . . she says the tip is too low.’ Then, turning to her, he told her in a slightly raised voice: ‘I keep telling my boss that my salary is too low . . . but that bastard refuses me, saying he pays his employees only what they are worth. Why the hell should I pay you anything more than you are worth?’ I was surprised at Lucky’s needless outburst, and had never seen this side of him. It made me all the more wary of him. He need not have paid her more, but neither did he have to insult her.

  I was glad that we were finally leaving the place. But Lucky was in no hurry.

  ‘Let me show you the mujra hall before we leave. It is quite a sight, and you may be surprised by some of the faces in the audience,’ Lucky said.