Pied Pipers of Dalal Street

In 1284, while the town of Hamelin was suffering from a rat infestation, a piper dressed in multicoloured clothing appeared, claiming to be a rat-catcher. He promised the mayor a solution to their problem with the rats. The mayor, in turn, promised to pay him for the removal of the rats. The piper accepted and played his pipe to lure the rats into the Weser River, where they all drowned.

Despite the piper's success, the mayor reneged on his promise and refused to pay him the full sum even going so far as to blame the piper for bringing the rats himself in an extortion attempt. Enraged, the piper stormed out of the town, vowing to return later to take revenge. On Saint John and Paul's day, while the adults were in church, the piper returned playing his pipe. In so doing, he attracted the town's children. One hundred and thirty children followed him out of town and into a cave and were never seen again. Three children remained behind: one was lame and could not follow quickly enough, the second was deaf and therefore could not hear the music, and the last was blind and therefore unable to see where he was going. These three informed the villagers of what had happened when they came out from church.

Source: Wikipedia & BBC

Just yesterday there was a news article in Business Standard that the famous PMS Fund Manager 'Saurabh Mukherjea settles an insider trading case with SEBI, pays Rs 1.38 Cr.' This article made the usual rounds of WhatsApp groups and sarcastic tweets.

As per the article Mr Mukherjea while at Ambit Capital in 2013 procured price sensitive material about Mannapuram Finance and did not maintain confidentiality. The 'case' was finally settled with 'consent'. Mr Mukherjea said 'Given that it has been over seven years since the events at heart of the matter transpired, I felt that it was appropriate to apply for settlement and move forward. I respect Sebi's decision and am grateful to them for disposing the matter.'

I really like this 'consent' method of settlement. But I wonder what would SEC do in such cases.

Some weeks ago one of the holding companies of Mr Mukherjea seemed to be in another controversy related to the promoter sending some retail investor a message. And a few weeks before that the holding companies of one of the scheme offerings of Mr Mukherjea's PMS in the smallcap space was made public. I believe it was done after the scheme was closed to further investments. Now the PMS is working on some Financials based scheme and popularising the same.

Personally there is a very thin grey line between doing social service for retail investors by having multiple webinars, sharing stock 'tips', business 'stories' and front running. I am literally a nobody to pass judgement, not that it even counts. But I like to stay away. Having said that initially I felt I must point these facts out on social media (I use twitter as a medium and Valuepickr as the message board for investing). But then realised such Pied Piper activities are as old as the hills.

Back in 2017 we had Equity Intelligence. I believe the story was 'Chor bane mor'. If Mr Veliyath took a stock's name on news the stock usually shot up. Then we had the small cap reversion to mean and people put all the 'Chor' stocks on the back burner. But like the phoneix he is back

Unfortunately the country where I am currently does not have Sony Liv and thus I have been unable to watch the series Scam 1992. Neither have I read the book nor do I intend to do so. Leaving aside Harshad Mehta and Ketan Parekh there have been numerous insider trading cases and SEBI imposed fines on both individuals and companies. Some of them are below.

The big bull Rakesh Jhunjhunwala - I love Mr Jhunjhunwala's optimism. It is the optimists who have taken the world forward and not the bears and cynics. RJ as per this news article in Economic Times paid Rs 2.48 lakhs towards 'settlement' charges for alleged violation of the Prohibition of Insider Trading Norms. As per the article this allows a party to settle the case without admission or denial of guilt.

The big bear Shankar Sharma - Mr Sharma of First Global is a market veteran. Has been speaking his mind for decades. The Scam 1992 writers Mrs Sucheta Dalal and Mr Debashish Basu I believe have written a number of articles during the Tehelka fiasco. I don't have the details of the story as I was a school kid back then. But Mr Sharma also seemed to have been banned by SEBI at one point of time as per this article in Moneylife. The accusation was that Mr Sharma was rigging share prices. During the Tehelka episode Mr Sharma was in the Enforcement Directorate net for unauthorised foreign exchange related transactions. He was arrested and also spent some time in Tihar Jail as per this news article by Zee.

The astute Samir Arora - I perhaps have not missed any interview of Mr Arora on YouTube in the recent years. Enjoy his rational approach to the act of investing. Sometime back I had read a very scathing article written by Mr Vivek Law about Mr Arora. Some of the quotes from the article are as below.

Given a chance, Samir Arora would have convinced Isaac Newton that what goes up doesn't necessarily come down. After all, as chief investment officer of Alliance Capital Mutual Fund, Arora was once the presiding bull in Indian stock markets who believed that share prices only moved in one direction - upwards.

To his detractors, however, Arora was a man who had mastered the art of talking up his favourite shares - including Digital Globalsoft, Mastek, Jammu and Kashmir Bank, Balaji Telefilms and Hinduja TMT - with convincing arguments. Alliance schemes were not the best performers in the market. Yet, Arora was at the head of every discussion table on India's stock markets. He would frequently appear in TV programmes, sharing his views on stocks he was bullish about and making his anguish known on days he lost money.

The market regulator charged Arora with cosying up to managements of companies he invested in to seek price sensitive information. He then bought or sold shares of those companies based on that information.

A very good recent interview I saw of Mr Arora had him exactly say the opposite on the lines of not being friends with management. I believe he also said he avoids going on dinners with them.

But what I read was that Mr Arora was given a clean chit in all the accusations made by SEBI as per this article. SEBI perhaps was on a witch hunt of a successful fund manager. I do not know.

These are some famous individuals but even employees of companies and companies themselves have been fined by SEBI on various issues including insider trading. Some of the famous examples are below.

Reliance - article
Piramal - article
Kirloskar - article
Divi's Lab - article
Tata Steel - article
United Spirits - article
Biocon - article
Indiabulls - article
Mannapuram - article
NDTV - article
Zee - article

WhatsApp groups and Telegram channels are today rampant with stock 'tips' and knowingly they seem to have been flouting SEBI regulations, for instance here.

The way forward for the retail investor

Though most of the folks mentioned above indulge in Buffett bashing there is one statement which Mr Buffett has aptly made:

It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently.

Money management is about trust. When a professional person manages someone else's money the most important trait to judge is honesty and then financial prudence. If there is an iota of doubt we retail investors have to walk away.

As Ed Thorp says the best advice he has to give to people is to learn to think for themselves.

Somethings a retail investor can do and be aware of:
  • The power of Google: In Google News search we can search basis dates (screenshot below). Use search effectively by using search operators 

  • Read and watch interviews of the manager you wish to invest with. Check which stock they talk about and find out from them scheme holdings before you invest. Are they pumping their own stocks is the question you have to answer.
  • Be active on Twitter and follow some honest and straight forward folks. Lots of examples who seem to have good BS filters. A few - this, this, this etc. [I do not know any of them personally].
  • Be active on Valuepickr as they say separate the wheat from the chaff. Well moderated and good content.
  • Speak to people. Networking is critical to know more about the fund manager. Reach out to the PMS/Fund. Ask them questions. You are their prospective customer, you have full rights to know as much as you want.
  • Consider Mutual Funds both active and passive. A fund which maintains its philosophy through thick and thin is more preferable. Index funds are no pushovers as Mr Buffett says. On a ten year timeframe hardly ~35% of equity funds have beaten their benchmarks. Some which come to my mind PPFAS Long Term Equity (consistent philosophy, I am invested so biased), DSP Quant fund (transparent rules based), Mirae Asset Emerging (generating constant alpha), HDFC Equity (consistent philosophy, PSU), UTI/SBI/DSP etc. Index funds. Speak to your registered Investment advisor if he is any good or do your research yourself on Morningstar or Valuereseasrch. Follow this and this on twitter for more on index funds [I do not know any of them personally].
  • There is no smoke without fire.
  • Thumb rule - the moment you feel CAGR of AUM for a money manager is more important than the CAGR of your portfolio, run away and don't look back.
  • Be very skeptical of 'Model Portfolios'. It is a selling tactic.
  • Ask for an existing investor's transaction statement in a PMS (with personals blacked out).
  • Mutual Fund Managers have much more stringent regulations so most of the information is already public.
  • Verify the total PMS returns on SEBI here.
  • If you use an Investment Advisor or read reports of a Research Analyst do verify on SEBI their license number. Also validate their previous reports and recommendations.
  • In investing it is guilty unless proven innocent.
  • Hard sales is bad sales.
  • It is difficult to get a man to understand something when his salary depends upon his not understanding it.
  • Write down the investment philosophy of your Fund manager in one line and introspect.
  • Pray to God that you are not being duped.
And remember that three children survived the Pied Piper's luring music: 
  • The lame child who could not follow quickly enough
  • The deaf child who could not hear the music
  • And the blind child who could not see where he was going

Be slow in your long term investing process, listen very selectively to experts and turn a blind eye to the selling tactics of professionals.



  1. Very well written. Thanks. Good advice for retail.
    I like last word : survive.
    Good advice that.

  2. Great article. Thanks for sharing

  3. Excellent article. This should get more exposure.

  4. Very well written, Deepak ji. Hard hitting. We at Smartsync always try to remind ourselves about the reputation part. Because it's a very difficult world out here. Temptations are always there.

    Thanks, once again

  5. Well written and a bit scary because everything and everyone is subject to manipulation

    1. Thanks. That's true we are all subject to manipulation.

  6. Very well written Deepak. Facts that investors need to imbibe to 'Survive first'. Thank you

  7. Great Article...It does a great serviceretail investor and educates them about these so called clean and good portfolio managers

  8. Awesome article. Eye opener. Thanks

  9. Awesome Read 🙏🙂🙂👍👍👍

  10. Very nicely articulated. Of immense help as most newbies are quick to action following the music and blind to the pitfalls of such activity.

  11. Good read. Thanks for posting.

  12. Excellent article. Very insightful and a must read for every retail investor in the market.

  13. Wow..
    Well Done. Thanks for sharing precious

  14. This is a very informative article articulated with the right examples and caution for investors especially for those like me who started investing in the last few years.
    Thanks again :-)

  15. Wonderfully explained article...thanks for sharing your knowledge...

  16. Excellent article,keep up the good work

  17. Good article but you missed the most recent one,Mr. Manish Chokhani,he appears on business channels quiet often too and is very admired among the investor community.


    1. Thanks for the observation. I was not aware who Mr Chokhani is. Apologies.

  18. Great article. must read this article at least once in 6 months.
    Please update the article now with information on the legendary CNBC news anchor Hemant Ghai.

  19. खूप सुस्पष्ट आणि रोकठोक माहिती..धन्यवाद...🙏

  20. Nicely written. I tried a couple on times to register on Valuepickr. But they refused every time. Don't know where I am committing the mistake. Can you help? Regards, Vivek mallik1vivek@gmail.com


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