New Delhi: In an opinion piece on Deccan Herald, Congress politician Praveen Chakravarty has called the stock market whipsaw as a result of the exit polls and the vastly contrasting actual poll results, “the world’s first exit poll stock market scam.”
In his piece, Chakravarty essays – just as Mitali Mukherjee had done for The Wire – the incredible series of events that led to frenetic activity in the Indian stock markets.
Chakravarty began with the events of May 31, a day before voting took place in the last phase of the election.
“Who were the people indulging in such intense trading [on May 31] for no apparent reason? While specific investor details are private information and unavailable, the NSE publishes stock market activity by investor category – retail investors (common people), domestic institutional investors like Indian mutual funds, and foreign investors. Turns out that it was foreign investors who accounted for 58% of all the buying of shares on that day.”
Illustration: Pariplab Chakraborty
This, Chakravarty noted was surprising and out of the ordinary when compared to just the prior week.
He notes that it “intriguing that on 31 May, when there was no big news development, a group of foreign investors suddenly turned bullish on India and decided to indulge in massive buying of shares.”
The next day’s exit polls – predicting big wins for the BJP-led NDA alliance – had the answer to why this was happening.
“But then, how did stock market activity double the day before these exit polls were released when, presumably, only the pollsters and their media organisations were aware of the predictions and those had not been made public yet?” asked Chakravarty.
On June 3, the stock markets opened to record highs, buoyed by the exit polls’ prediction.
A day later on June 4, when it became clear that the exit polls had been wrong, “The stock market… lost Rs 30 lakh crore in value just on counting day, the highest fall ever in its history. By which time, the foreign investors had sold their shares and made massive profits. The vast majority of retail investors (common people) saw their share value decline, and suffered huge losses.”
Chakravarty notes that the chronology is the “simpler side” of the story and hides the fact that some profited enormously through speculation in the stock markets “using share derivatives, through which investors can profit from both the rise and the fall in the stock markets.”
These derivatives investors gain the most when there is tremendous volatility, as there was in the time between May 31 and June 4.
The exit polls’ prediction was directly responsible for the extraordinary rise and fall. “It was the exit polls that induced this desired volatility for derivatives investors. Was this done wittingly or unwittingly, is the Rs 30 lakh crore question,” Chakravarty noted.
Chakravarty pointed to the fact that while many lost, some gained. He ends the piece with five questions:
1. Who are these foreign investors that pumped in huge sums of money into India’s stock markets on May 31?
2. Did they act on material, non-public, inside information of the exit polls to profit from them?
3. What is their relationship to the exit pollsters, or the media organisations involved?
4. Whose money or on whose behalf were these investors investing?
5. How much did these investors profit in just these two days of trading?
