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Suicides shake India's broking community

Bimal Gandhi hanged himself from a ceiling fan, a common enough method of taking one's life in India.

But until very recently, suicides were hardly heard of in the stock-broking community to which the 40-year-old Gandhi belonged.

That tragically changed when the Bombay Stock Exchange index lost a whopping 25 per cent between March 1 and April 12.

Gandhi, the owner of the El Dorado group of companies and Dil Vikas Securities, left no suicide note but police said he was depressed by the sharp slump in share prices.

Among Gandhi's shocked colleagues, Saumil Trivedi still can't believe he took his life. "It is a nightmare. Absolutely unthinkable," Trivedi said.

"He could have had business losses... bad debts, but I don't think his problems were insurmountable. He must have felt cheated by someone, lost faith in the system, in life," he said.

Whatever the reason, Gandhi was not the only person to take his life after the heart-stopping market slide.

Several others -- intermediaries and investors, and in some cases their hapless kin -- committed suicide after losing out big time in the chase for money.

One victim was Sona Banka. She jumped from the ninth floor of a building shortly after her 22-year-old husband Abhishek drowned himself in Calcutta's Hooghly river.

Some newspaper reports said he worked with a Calcutta broker and had speculated in the market well beyond his means.

Bank employee V K Aggarwal and his wife Ramkali took poison in a Delhi hotel. According to media reports, he had used money belonging to a society of bank employees to dabble in the market, only to see the market fall out from under him.

"The Gujarat earthquake was rattling, but for many, their real earthquake came afterwards," said veteran broker Priyakant Dalal, referring to a quake that killed more than 30,000 people in January in the western state which is home to many Indian brokers and investors.

Playing the game

The global euphoria a year ago over technology, media and telecom stocks pumped up the sector, and indeed the whole market, drawing in both big-time speculators and small-time investors.

Dalal said some housewives, typically middle- and upper-class women who get together in the afternoons for high-stakes card games, had also started playing the markets.

It was all too convenient with trading terminals of the Bombay exchanges spreading across the country.

More savvy investors jumped onto the share-financing wagon -- lending money to others to buy shares with returns getting better by the day. In some cases unofficial lending rates topped an annual 100 per cent.

Markets started coming off last year, but day-traders, who gave the market most of its liquidity, played on regardless.

The post-mortem after the fall shows how caution was thrown to the wind when the good times rolled.

Brokers, who for years did a great deal of business on trust, were loath to change the practice of not charging margins upfront for fear of losing clients in the highly competitive scene. Client defaults are believed to be haunting many a broker.

And there is probably no count of the number of investors who feel cheated.

The Securities and Exchange Board of India recently announced it would end by July a decades-old carry-forward system believed to have facilitated the rampant speculation.

Before the slump, nearly 90 per cent of turnover at India's 23 exchanges involved carry-forward trading in which investors could postpone for months the actual taking delivery of shares.

Instead they were borrowing at higher and higher rates of interest to fund both their obligatory margin payments on stocks, and the actual position -- with the lender supposed to take delivery of stocks.

The carry-forward system encouraged huge growth in unofficial lending in the bull market -- creating overleveraged brokers and huge potential for a crash when the market started falling.

Many of the financiers got badly burned and contributed to the fall by frantically selling stocks as the market suddenly found itself in its worst crisis in a decade.

The many people who gambled with other people's funds, with their knowledge or without, could finally smell the money -- but unfortunately it was the smell of money burning.

The crisis saw head-honchos at the Bombay Stock Exchange lose their jobs, leading brokerages lose trading rights, and the once king-like 'Bombay Bull' broker, Ketan Parekh, facing fraud charges.

The market has recovered some ground since the turmoil, regulators are vowing to tighten up trading rules and a parliamentary panel is investigating the sell-off.

But the better prices are too late for the players who lost so much, and thought death was their only option.

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