Were retail investors hurt by the June 4 market crash? | Data

As opposed to FPIs and mutual funds, retail investors seem to have bought the dip on results day while booking profits the day before

The activity of the stock market as the general elections drew to a close has been a subject of controversy. Indian stocks hit record highs after most exit polls predicted a massive win for the BJP. They crashed on June 4, the day of the results, when it became clear that the BJP was not getting a simple majority.

Is there a case to be made that the volatility of the stock market – with the highs in the run-up to and after the exit polls – hurt retail investors while benefiting “dubious foreign investors,” as the Congress claimed after the results?

On May 31, a day before the last day of voting when exit poll results were announced, the total traded value of the stocks doubled. On June 3, the first day of trading following the exit polls, the National Stock Exchange’s Nifty-50 closed 3% higher from the reading on the previous day.

On June 4, the BJP’s tally was below the majority mark but the National Democratic Alliance managed a tally of 292 seats — well short of what most exit polls predicted. Nifty-50 tumbled by nearly 6% (Chart 1). This was its steepest fall since March 23, 2020, when it plunged by 13% after India went into lockdown to contain the spread of COVID-19. The fall on June 4 wiped out ₹30.9 lakh crore of investor wealth.

Chart 1 shows the movement of the NSE Nifty-50 in the days leading up to the election result.

Chart appears incomplete? Click to remove AMP mode

Queering the pitch was Union Home Minister Amit Shah’s statement on May 13. He said, “I suggest that you buy [shares] before June 4. It will shoot up”. On May 19, Prime Minister Narendra Modi said that during the week when the results would be out, the stock market would “touch such highs” that technicians “would be tired of the action” [sic].