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Market volatility during Election Result UPSC NOTE

 The Story So Far

  • Extreme volatility occurred after the exit poll results and the Lok Sabha election results on June 4.

  • The Nifty and Sensex recovered their losses after the initial drop.

  • Congress accused Prime Minister Narendra Modi and Home Minister Amit Shah of manipulating the stock market to benefit certain investors.

  • Stocks of companies close to the government, like Adani Group, and public sector companies gained the most.

  • On June 4, both indices fell by almost 6%, the worst single-day fall since March 2020, wiping out about ₹30 lakh crore in investor wealth.

  • PM Modi and Amit Shah had encouraged investors to buy stocks before June 4.

  • Congress claimed PM and HM encouraged retail investors to buy stocks before election results to benefit certain foreign investors.

  • On May 31, the value of stocks traded for cash doubled to ₹2.3 lakh crore

  • More than half the buying came from foreign investors.

  • Allegations that foreign investors had insider information about exit poll results.

  • Opposition parties called for a joint parliamentary committee (JPC) to investigate.

Market Regulator's Rules

  • SEBI Regulations: Planting false or misleading news to induce sale or purchase of securities is illegal.

  • Exceptions: General comments on market trends made via mass media are not considered illegal unless proven to be in collusion with certain investors.

  • Piyush Goyal Claimed foreign investors bought high and sold low, while Indian investors used market volatility to their advantage.

  • Retail investors were net sellers when the market rose and net buyers when the market crashed. FPIs were net buyers when the market rose and net sellers when it crashed.

  • Retail Investors Definition: Includes not just small retail investors but also NRIs, HUFs, and various firms.

  • A thorough investigation is necessary to determine if there was manipulation and to understand the trading patterns of individual investors.



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Learnerz IAS | Concept oriented UPSC Classes in Malayalam: Market volatility during Election Result UPSC NOTE
Market volatility during Election Result UPSC NOTE
Learnerz IAS | Concept oriented UPSC Classes in Malayalam
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