May 25, 2014

Exit Polls and Bull Runs on Stock Market

R P Singh

NOW that the 16th Lok Sabha election results are out and the country is in the high political mode about the formation of the next government, one may well cast a look back on the forecasts of the exit polls and compare them with the real outcome. As we know, opinion polls do influence --- to an extent at least --- the voters and the outcome of the elections. Rightly, therefore, the opinion polls have been banned during the election process. But an exit poll is for what? Who benefits from an exit poll? Or how it influences the process of free and fair elections? These are the questions which were never raised. It is as if an exit poll is innocuous. It was being said in the recent past that predictions of the exit polls conducted in the 2004 and then in the 2009 Lok Sabha elections proved to be wrong. What, however, skips the attention is that there were bull runs on the stock market after the 2004 and 2009 elections as well. This time also, similarly, the exit polls created a bull run on the stock market. Thus, on May 13, 2014, the Sensex touched an all time high of 24,069 and NSE a high of 7,172 points. Was it a sign of the Indian economy getting healthy and recovering from the slowdown? By no means; in fact various indices present an opposite picture of the Indian economy. Industrial production is going down; industrial activity has slowed. The retail price index reached 8.59 percent from 8.31 percent earlier. The fundamentals of the economy are not showing any remarkable gain. And yet the Bombay Stock Exchange (BSE) reached all time high of 24,897.88 on May 13, 2014, sharply up from 22,508.42 on May 7, 2014 --- an increase of 2,389.46 points just in a week. Similarly, in the same period, the broad-based National Stock Exchange (NSE) reached 7,172.35, compared to 6,715.30 a week ago --- an increase of 457.25 points. It is notable that this increase took place in just one week --- from the eighth round of polling in Lok Sabha elections to the ninth and final round of polling. So the question is: Why was there such a big rally in the Sensex? It is an established fact that in present system of parliamentary and assembly elections, huge corporate funds are made available to various parties through legal and still more through illegal routes. An initial estimate was that Modi’s election campaign expenditure had touched Rs 10,000 crore. Helicopters and private jets were provided by corporate houses for his election campaign. On May 7, then, the corporate media intentionally leaked fake exit poll results in the evening and, as the nature of speculative stock market is to encash upon the futures, a rally in the BSE and NSE started on this fake nod. It is another thing that small investors became the scapegoats in this process. The deliberately propped-up Sensex rally was in fact a method for mobilisation of huge legal and illegal election funds by corporate houses through the stock market. Let us see the prices of stocks (shares) of three companies of the Reliance as an example. The Reliance Industries’ share price on May 7 was Rs 963.25 and went up to Rs 1,061.35 on May 13, 2014. On one single day, May 13, 2014, the company thus benefited by Rs 80 crore. The Reliance Infrastructure’s share price was an all-time low at Rs 360 in March 2014, and was not increasing since then, but went up to Rs 596 on May 13, 2014. Similarly, the price of Reliance Power shares went up to Rs 73.45 from Rs 61.10. Adani’s Future Group share prices rose from Rs 78.90 to Rs 122.55 on May 14, 2014 and thus the group gained Rs 70 crore in a single week. Nine top corporate houses were thus richer by Rs 280 crore. This is thus a pre-determined game plan to realise back the legal and illegal corporate funding for elections. It was therefore not surprising that in only a few days time, the so called correction or consolidation took place and the artificially high prices of shares went down. But whenever such a ‘correction’ takes place, the very corporate players who were in the role of sellers in stock market earlier, become buyers and thus recover all their holdings at cheaper rates. Then the margin between the sale and future purchase prices is many times over the amounts which they spend legally and illegally for election funding. An exit poll is a well planned creation of ‘sentiment’ in the share market through corporate media and poll survey agencies --- not only to recover the entire election funding but also to make a huge profit out of it. The exit polls are, in other words, a huge fraud and source of corrupting the election process through corporate funding.