This brings to the fore the second related set of questions concerns. What were and are the sources of funds of these domestic bulls who take risks and drive markets, for at least some time, and of the bears who on occasion even hammer them out of business? Brokers we must recall deal only marginally with their own resources. Their primary role is to convince investors to provide them funds to realize strategies they believe would yield quick and large returns. Media reports on the events that led to Ketan Parekh's fall from grace have focused on the funds he fraudulently acquired from the Bank of India and other commercial banks. That story is now well known. Parekh was issued pay-orders, which are in the nature of demand drafts, by the Ahmedabad-based Madhavpura Mercantile Cooperative Bank (MCCB), without any reciprocal pay-in of funds either directly in the form of cash or indirectly in the form of deposits that could serve as collateral for a loan. This was not without any reason. In the past MMCB must have benefited immensely from its association with Parekh, as is evident from reports suggesting that its total exposure to Parekh was in the range of Rs. 800 crore. Clearly Parekh and the MMCB management saw the issue of around Rs. 200 crore worth of pay-orders as a form of temporary accommodation that would be made good by Parekh as soon as his speculative trades had been completed. A reading of Budget 2001, which provides a range of sops to render markets buoyant, does in fact suggest that his gamble was not all to wild. It failed, rendering the MMCB pay-orders worthless, not so much because of the judgment on which it was based but because of the concerted move by the bear cartel to exploit unfairly obtained knowledge of Parekh's maneuvers by dumping shares on which Parekh was placing his bets.
 
But, given Parekh's access to resources and acumen, he must have made an attempt to counter these moves of the cartel. Hence, the collapse in prices could be explained only by ability of these operators to supply an adequately large sum of these and related shares. What then was the source of the riches of the bear cartel, which finally won out? While a final judgment on the matter must await the SEBI's report on its investigation, there are a number of strands of the answer that have been revealed. Being regular operators, it is quite possible that the bear operators had in their pool significant amounts of these crucial stocks, not necessarily belonging to them, but which they were trading on behalf of the investors they represented. It is true that under the recently framed rules  relating to trading and settlement in dematerialized form, these stocks have to be lodged with a depository against the name of the actual owner. However, in practice many brokers carry large volumes of stocks in their pool accounts. Various reasons such as use of stocks as margin deposits by clients, delay in the flow of instructions from the client's depository participant to the brokers depository participant and intentions to sell in the subsequent settlement period have been used by broking houses to explain away they unusually large pool accounts. In the event, there are a large number of in-transit shares that brokers have access to, even if they do not have legal ownership right to trade in them.
 
This pool, however, does not limit the trading ability of the bear cartel. It could use a number of avenues afforded by stock-market rules, framed in the wake of liberalization, to increase liquidity in the market. One such is the practice of borrowing and lending stocks. Under the Securities Lending Scheme introduced in 1997, holders of stocks lodged with the depository, like the Stockholding Corporation of India Ltd (SHCIL), could come to an agreement, implemented through the intermediary, to lend these stocks to others for a specified period of time for an interest. Some stocks holders like the FIIs and institutions like the UTI and the insurance companies often have large volumes of individual stocks in their kitty. So long as members of the bear cartel have information as to which players have large volumes of specific stocks, they can work out a deal to borrow these shares, providing them access to them even if they do not have the right to trade in them.
 
Knowledge of the existence and source of the required shares can encourage the practice of short-selling, or sale of shares not owned by the trader, in the belief that prices are going down and the shares can be made good to the actual owner by buying them back at much lower prices at a later date. That this practice was resorted to by the bear cartel is clear from the fact that the SEBI decided to ban short-sales in the wake of the collapse in stock indices in March. Thus the bear cartel clearly required litlle by way of own resources to indulge in the activities that led up to the collapse of markets.