What’s 30-Trillion Rupee Exit Poll Stock Market ‘Scam’?

Buy Stocks Before June 4, Suggested Prime Minister and Home Minister

Newsreel Asia Insight #248
June 11, 2024

Prime Minister Narendra Modi and Union Home Minister Amit Shah made public statements just before the national elections, hinting at a favourable outcome for the Bharatiya Janata Party (BJP), suggesting that this would positively impact the stock market. On May 13, Shah said, “Buy shares before June 4th.” On May 19, Modi predicted the stock market would “break records” on the counting day.

As the final phase of polling approached, various media outlets released exit polls indicating a substantial victory for the BJP-led National Democratic Alliance (NDA), projecting a significant increase in seats compared to previous elections. These projections far exceeded the actual results.

On May 31, just before the release of these exit polls, there was an unusually high amount of trading activity on the National Stock Exchange (NSE). The trading volume doubled compared to the previous day, a surge that occurred without any major public news or developments to justify such an increase. During this period, foreign investors were particularly active, accounting for a large proportion of the buying, which raised questions because no public news at that time could have influenced such a decision.

The market then saw a sharp rise following the optimistic exit polls, driven by expectations set by the polls. However, when the actual election results were counted and the BJP’s performance fell short of both the exit polls and the halfway mark needed for a majority, the stock market experienced a significant decline. This unexpected outcome led to substantial losses, worth about 30 trillion or 30,000 billion rupees, particularly for those who had invested based on the anticipated election outcomes.

The statements by Modi and Shah, suggesting a robust market post-election, could be seen as attempts to influence the stock market based on expected electoral gains. This raises ethical and possibly legal questions, especially if these statements were seen as using insider information to affect market prices.

The Securities and Exchange Board of India (SEBI), which enforces regulations to prevent market manipulation and protect investors from misinformation, might view these actions as a breach of trust and misuse of power.

This situation has led the opposition, including parties in the INDIA alliance, to call for a Joint Parliamentary Committee (JPC) investigation into the matter, questioning not only the role of the Prime Minister and the Home Minister but also the integrity of the exit polls and the financial interests behind them.

Understanding who these foreign investors were, whether they acted on non-public, material inside information from the exit polls, their relationship with the pollsters or media organisations involved, whose money they were managing, and how much they profited from their trades around the time of the exit polls and the election results, is critical. It helps to assess the level of responsibility and the potential repercussions for their actions, especially if they were managing funds on behalf of others like retail investors or institutions.

Praveen Chakravarty of the Congress party has called it “the world’s first ‘Exit Poll Stock Market Scam,’” in an op-ed for Deccan Herald.