How Manu Manek aka Black Cobra went from college trader to market marauder

That a mere stockbroker could be dubbed Black Cobra then tells the story of how dangerous Manu Manek Mundra, the man given that infamous title, must have been. 

Born into a middle-class family in Calcutta in the 1940s, Manek started his trading career while still in college, eventually graduating as a full-blown broker. His modus operandi was the same as that of countless others who flourished through the 1970s: manipulate the markets in the absence of any effective regulation. 

Pre-Sebi era

This was the era before the Securities and Exchange Board of India (Sebi) was set up in April 1988. Its predecessor, the Controller of Capital Issues, the designated regulatory authority for the Indian securities market, saw itself primarily as responsible for overseeing the issuance of capital by companies and was generally disinterested in what they did after that.

Manek started his shenanigans on the Calcutta Stock Exchange, which in the 1970s was rife with such manipulators. He made his initial money by cornering stocks of companies with low trading volumes and driving up their prices. Eventually, he would dump them on gullible investors suffering from FOMO (fear of missing out). 

Soon, thereafter, he moved to Bombay, where he set himself up at the centre of a bear cartel that struck terror in the hearts of company promoters, though it also befriended many. Manek had an outsized influence on corporate decisions, including the vital dividend and bonus announcements. 

By now, he was an acknowledged short-seller. Given his growing wealth, he would also lend money to other traders at exorbitant rates of interest.

With a natural gift for sensing which companies were heading into trouble and the ability to make sense of numbers, he picked on vulnerable companies, driving down their stocks. He kept petty officials at the stock exchange happy so that whenever he needed trading to stop for a while, they would call a flash strike.

The clash with Ambani

In 1982, the mighty marauder took a big hit when he crossed swords with the legendary Dhirubhai Ambani. Five years after the successful Reliance Industries Ltd (RIL) public offer had made it the darling of the markets, Manek got wind of some financial distress (it is quite possible that he spread that rumour). 

Now a part of a cartel that would hunt in packs, he started selling RIL stock with the intention of driving its price down. However, even at that early stage of his business, Ambani was too smart and well-networked to allow the short-seller to get away with it. Using his connections, he bought off everything the bear cartel was selling, thus keeping the share price steady. 

Eventually, in the face of his determined defence, RIL shares rose, and Manek, having run out of options and needing to produce the shares he had been selling, was forced to buy them from the market at a higher price than he had bargained for. The intervening impasse led to BSE being closed for two days while Manek settled with Ambani.

But he was a survivor, and the defeat was a temporary setback.

Manek vs Mehta

Soon, he was back, this time taking on Harshad Mehta, another infamous scamster. In 1991, the big bull clashed with the reigning bear, and the result was a bloody battle. Manek kept targeted shares of companies that Mehta was accumulating. What he hadn’t bargained for was Mehta’s unrestrained ability to raise funds from banks without providing adequate security. This allowed him to keep buying shares that Manek was selling. In the face of Mehta’s buying frenzy, the bear cartel had to cede ground.

Once again, Manek had to taste defeat, though he did strike back after Mehta’s fake bank receipt scam was outed. Belying the legendary honour among the thieves, he was said to have orchestrated the raids on Mehta. At least, that is what the latter’s wife, Jyoti, claimed in a letter on their website: “Manu Manek also became an informer and engineered a raid on Harshad by the I-T department on 28.02.1992.”

The episode turned out to be the last hiss of the black cobra. With Sebi gaining teeth and a new generation of investors led by Rakesh Jhunjhunwala discovering value investing, the old age of manipulative investing took a short break (before the likes of Ketan Parekh revived the concept in 2000).

As stealthily as Manek had conducted his business, he slithered away into the darkness, rarely to be seen again. His death was just a side note in the history of scams in the Indian markets. That even the date of his passing away is shrouded in mystery is a commentary on his ignominious end.