It was New Year's Eve 1999, the dawn of the new millennium. A close friend – a tech specialist at a top consulting firm – called to wish me a happy new year. He sounded unusually upbeat. When I asked why, he proudly said he had made a fortune in the stock market, his bonus was huge, and he had even taken loans for a luxury car and a bigger apartment. He had poured a lot into random "technology" stocks.
He urged me to jump in on a small tech company about to launch an ADR (American Depositary Receipt) on Nasdaq. Its price had shot from ₹15 to ₹85 in just six weeks. “It will hit ₹250 soon”, he said with total confidence.
I actually knew more about that company than he did. It was basically a shell – recently renamed from “XYZ Securities Ltd” to “XYZ Infosys Limited.” No real business, no employees, no assets. When I tried to warn him, he brushed me off: “You have no idea what's coming”.
That Diwali in 2000 turned out to be the darkest day of his life. He had lost everything – his job, savings, home, car, marriage, health, and his confidence. He moved back to his parents’ house carrying debt of over ₹70 lakh.
The run-up from December 1998 to February 2000 was one of the wildest periods in Indian stock market history. The Nifty50 index more than doubled (over 120% gain) in just 15 months, driven mostly by “new-age” tech, media, and telecom companies. Buzzwords like ICE (Information, Communication, Entertainment) and TMT (Technology, Media, Telecom) were everywhere.
To really understand the magnitude of madness, one needs to note the challenging backdrop:
Politically, India was unstable. From May 1996 to October 1999 – just 40 months – we had three general elections. Each produced hung parliaments and shaky coalitions of 20+ parties.
Economically, things were rough. GDP growth crashed to around 4.3% in FY98 (from 8% the year before). Consumer inflation averaged over 13% in 1998, peaking at nearly 20% in late 1998. The RBI jacked up its Bank Rate to 11% early that year, hiked repo rates sharply (up to 14% by mid-2000), and prime lending rates hit 13–14%. Riskier borrowers paid 15–19%.
Geopolitically, we fought the Kargil War with Pakistan in May–July 1999. Tensions with China rose too – India openly called China “Enemy No. 1”, and China backed Pakistan during Kargil.
Internationally, after India's nuclear tests in May 1998 (Pokhran-II), the US, Japan, and others slapped on economic, tech, and military sanctions.
Globally, the US Fed's easy money policies fueled a massive dot-com bubble. Tech companies with no profits or clear business models traded at insane valuations.
The Y2K scare created huge demand for software fixes. Indian IT firms sent thousands of engineers abroad to update old systems before January 1, 2000. Suddenly, every middle-class family wanted their kids to learn coding. Computer coaching centers popped up on every street. Wipro's Azim Premji briefly became one of the world's richest people (second at one point in early 2000). Infosys and TCS turned into household names.
Hundreds of companies slapped “Technology”, “Infosys”, “Media”, or “Communication” onto their names. Big business houses rushed to launch tech subsidiaries. Overnight, firms with zero tech know-how or real business popped up and soared to crazy prices.
Old valuation rules went out the window. People talked about “eyeballs” and “footfalls” instead of earnings. Just like Harshad Mehta in the early '90s, operators like Ketan Parekh manipulated stocks – especially a group called the "K-10" – luring everyday investors like my friend with hype and fancy jargon.
The bubble burst in February 2000. The Nifty gave back all those gains over the next 18 months. By September 2001, it was back to December 1998 levels. Most fake tech companies disappeared fast. Many big groups quietly dropped their IT dreams and refocused on core businesses.
The few solid players that survived the storm? They went on to make India a global IT services powerhouse and added real strength to our economy.
My lesson from this episode
Tech revolutions are disruptive and powerful – they eventually make economies and markets stronger. But not every investor has to jump in headfirst during the chaos. Sometimes the smartest move is to watch safely from the sidelines until the storm passes. There are always plenty of good opportunities once things calm down.
That experience with my friend still reminds me: When excitement drowns out common sense, step back. Real winners in stock markets are found with patience, not panic buying.
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