Before Congress leader Rahul Gandhi wondered on Thursday why Prime Minister Narendra Modi and Home Minister Amit Shah offered uncalled for advice to stock market investors, a Trinamool Congress MP and a highly regarded former bureaucrat had flagged the issue. While one had sought a SEBI investigation into the 'exit poll'-induced stock market 'spike and crash', the other had probing questions for the Finance Ministry.
On June 5, Trinamool Congress's Rajya Sabha MP Saket Gokhale had written to Securities and Exchange Board of India (SEBI) seeking an "urgent enquiry" into the 'exit polls'-induced spike in stock markets on June 3 and the subsequent fall on June 4 in the face of reality.
Gokhale had said he was particularly upset by one exit poll: India Today-Axis MyIndia poll. He said the discrepancy in this poll was 23-37%, which he said was "shockingly off the mark." It had predicted 361-401 seats for the BJP-led NDA but the formation eventually touched only 292. In West Bengal, Gokhale said the discrepancy was a "whopping 116-158%;" the poll predicted 26-31 seats for the BJP but it ended up getting just 12.
In a missive to SEBI chairperson Madhabi Puri Buch on June 5, Gokhale called for a probe into three aspects. One, whether there was intentional inflation of exit poll numbers by India Today Axis MyIndia. Two, whether the entities that booked profits on June 3 are linked to the BJP, India Today or Axis MyIndia.
(On June 3, Bloomberg had reported that Adani stocks had jumped $20 billion on signs of landslide win for Modi. It said all 10 Adani firms surged as exit polls signalled Modi's return with a massive majority.)
Three, whether the same entities indulged in any short selling on June 4 when the election results caused the stock markets to crash. (Short selling is the bulk purchase of a stock whose price an investor knows will fall and its subsequent sale in the open market. Later the same stocks can be bought for a much lower price than at which they were sold.)
On June 3, riding the soaring confidence generated by the exit polls, investors had made massive profits. But the very next day, when results were announced, over Rs 31 lakh crore (Rs 31 trillion) were wiped out. Gokhale said that if the poll was "intentionally skewed", then what happened was "massive stock market manipulation".
Gokhale also alleged that there was conflict of interest involved. In the letter to the SEBI chairperson, the Trinamool MP said that Axis MyIndia was hired by the BJP to do election surveys for it. "It is a clear conflict of interest on the part of the agency to be working for the BJP while also participating in exit polls without a clear and unequivocal disclosure of a glaring conflict of interest."
On the day that Gokhale wrote to SEBI, a highly regarded former secretary to the government of India, E A S Sarma, had written to the union Economic Affairs secretary, Ajay Seth, asking how the Prime Minister and the Home Minister could mislead investors by speaking of a bull run on June 4.
Talking to a business channel owned by Adani, Modi sounded so bullish that he joked that the programming of business channels would fail on June 4. Talking to the same channel, Union Home Minister Amit Shah said investors should buy before June 4 as, according to him, the markets will shoot up.
Sarma told the Economic Affairs secretary that the PM could not have made what he called an "imprudent statement" without inputs either from within the Ministry of Finance itself or from outside. "But his statement compounded by the Home Minister's gave a feeling to unwary small investors that they were privy to some inside information, prompting them to blindly invest whatever little they had. The huge losses that followed have certainly eroded the credibility of the stock market," he said.
Sarma too had a set of questions for the union secretary. One, Did some "expert" in the Ministry of Finance provide inputs on this to the PMO? On what basis? If the source of such misleading information can be identified, the concerned needs to be brought to book immediately.
Two, Did an outsider, especially a large investor in the stock market, provide unsolicited advice to the PM? If so, did that person deliberately mislead the PM to trigger volatility in the stock market and mint profits at the cost of small investors? If so, such an investor needs to be identified and subject to deterrent penal action.
Three, Where did the investor or investors who earned profits park their ill-gotten money? Is there a link to a money-laundering exercise? The Enforcement Directorate, if it can function independently as it should, may be asked to investigate this possibility. Four, What has been the role played by the SEBI in all this? Could SEBI have calmed down the market by countering false statements?