Expressing concern at the disturbing combination of factors that triggered a stock market surge on June 3 (after the questionable Exit Polls) and a collapse after results were declared on June 4, former Secretary to the Government of India, EAS Sarma has raised sharp questions related to the questionable stock market surge and then collapse over the past week and demanded that ED, CBI and CBDT investigated the matter thoroughly.
The open communication to the government of India states that, even today, the stock market has not fully recovered. It appears that the trigger for the unsavoury sequence of events came from no less than the Prime Minister himself, when he “predicted” a stock market surge on June 4, namely, the date of counting of votes in the 2024 elections, conveying a hint that investors should invest in the stock market, as his government’s return to power would usher in further so-called “reforms”.
While expressing perplexity at what really prompted the PM to make such an ill-advised statement, Sarma adds that Modi’s statement was followed by the Union Home Minister, who is reported to have added fuel to fire by saying, that investors should buy before June 4.
As per his expectations, as reported, “the markets will shoot up” “The Prime Minister and the Union Home Minister are expecting market gains on 4th June” (livemint.com/market/stock-m…).
The PM being a responsible person occupying a high public office would not have made such an imprudent statement, had he not got some 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 entire communication may be read here:
From: Dr E A S Sarma Former Secretary to the Government of India
To: Shri Ajay Seth Secretary (Economic Affairs)
Govt of India
Dear Shri Seth,
It is disturbing that a combination of factors triggered a stock market surge on the June 3, 2024, followed by a huge crash during the day that followed, wiping out the hard earned savings invested in the market by small and marginal investors, allowing the bigger stockmarket sharks to profiteer at their cost.
Even today, the stock market has not fully recovered. It appears that the trigger for the unsavoury sequence of events came from no less than the Prime Minister himself, when he “predicted” a stock market surge on June 4, namely, the date of counting of votes in the 2024 elections, conveying a hint that investors should invest in the stock market, as his government’s return to power would usher in further so-called “reforms”.
I am not sure what really prompted the PM to make such an ill-advised statement. His statement was followed by the Union Home Minister, who is reported to have added fuel to fire by saying, that investors should buy before 4th June.
As per his expectations, as reported, “the markets will shoot up” “The Prime Minister and the Union Home Minister are expecting market gains on 4th June” (livemint.com/market/stock-m…). The PM being a responsible person occupying a high public office would not have made such an imprudent statement, had he not got some 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. This is something that cannot and should not be taken lightly, as it caused widespread misery to lakhs of small investors.
I have the following questions that call for answers: 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.
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.
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.
What has been the role played by the SEBI in all this?
Could SEBI have calmed down the market by countering false statements?
Has SEBI taken up an investigation?
There were reports earlier that the regulatory agencies were getting ready to deal with a stock market crisis that was likely to occur.
If that is so, why should the regulators become silent spectators to a stock market bloodbath?
I feel that the Department of Economic Affairs cannot afford to remain passive and allow the culprits to go scot free.
It should ask the ED, CBI and CBDT to conduct a well coordinated investigation in a time bound manner, so that the incoming new government, the newly elected Parliament and, of course, the public at large, would have to be apprised of this.
Regards,
Yours sincerely,
E A S Sarma
Visakhapatnam June 5, 2024