People walk past the Bombay Stock Exchange (BSE) building in Mumbai.
Credit: PTI Photo
There is controversy over the behaviour of the Indian stock markets on the day before the exit polls of the Lok Sabha election were announced, on the market day after the exit polls and on the day the results were announced.
On May 31, a day before the last day of polling, foreign investors, who were net sellers of shares up to that point during the week, made heavy purchases of Indian shares, accounting for 58% of the day’s trading. The next day, exit polls predicted a landslide victory for the BJP/NDA. The next trading day, on June 3, markets touched all-time highs and foreign investors and many others who had bought on May 31 made handsome profits.
On the counting day, the markets crashed wiping out about Rs 30 lakh crore of investors’ wealth. Before that Prime Minister Narendra Modi and Home Minister Amit Shah had predicted that the market would go up and had advised investors to buy shares on the upswing.
These have given rise to questions and the suspicion that they point to some kind of market manipulation. Why did foreign investors reverse gear and buy shares on a large scale just before exit poll results were made public? Were they really foreign investors or was this Indian money being round-tripped? Were the exit polls manipulated to send the market on a bullish overdrive? Who benefited from the unusual buying and selling on those days when huge amounts of money changed hands? There is also the question of Modi and Shah making recommendations to buy shares in the market, especially when it was known that the BJP would not do as well as claimed.
It is unusual and inappropriate for the Prime Minister and Home Minister of the country to do so, even if it is to be believed that their intention was only to show that they were confident of victory in the elections. If, as has been alleged, their own internal surveys were showing that they were not winning, then matters become a lot more serious than innocent grandstanding.
These and many more questions need answers. Petitions have been filed in the Supreme Court seeking directions to the government and the Securities and Exchange Board of India (SEBI) to investigate and report on the matter. Opposition parties have made serious charges and demanded the setting up of a Joint Parliamentary Committee (JPC), as was done in the case of the Harshad Mehta scam in 1992.
SEBI has been found wanting in the past as the investigation of the charges against the Adani Group showed. Investigation by a government agency will not be credible, either. The Opposition parties are likely to raise the issue in the upcoming session of parliament. A credible and effective investigation is necessary to answer the questions and remove the concerns that have arisen.