The share market rising by 2100 points or 15% and investors gaining 6.5 lakh crore rupees in just 60 minutes was touted as a return of confidence in the market. Let us analyse whether that was really so, or was it just a jugglery by a few manipulators?
The result of India’s general election began on 16th May 2009. The next day was spent in grappling with the impact of the result. On Monday, May 18, 2009 the NSE and Mumbai stock exchange saw this unprecedented surge. Was this surge due to some fundamental change in the working of the market? Was it because the companies had improved their profits? Was it because just in one day the incoming government had infused some legislation that benefitted the market? Was it because the global economic crises had subsided? Clearly the answer to all these questions is in the negative. In the absence of any of these factors, how could investor confidence go up just by the result of an election and that too, of the same political party who was already in power before elections for five years?
Clearly, the rise and fall of share prices is not in the control of people who can invest a paltry crore or two in the market. It needs a bigger fish to bring a wave. It is always some Mukesh, Anil, Ketan or Harshad who do it, and it is they who benefit from it, not the petty investor. But, you may say, the small investor can sell his shares during buoyancy and walk away with the profits. Sorry, gamblers lose just because they can’t walk-off with the gains. Greed for more gains makes them lose. Exactly same is the case with share investors.
Let’s see how this works. Much before 18th May 2009, if just 10 big capitalists and an equal number of share brokers join hands and decide that irrespective of what the election result is, and irrespective of what the share prices are, they will buy shares indiscriminately on 17th May, 2009. This is easy for them because they have to buy the shares notionally without spending a rupee. Obviously the so-called investor, who has petty sums to play with, will see the demand and rush to buy shares, not knowing that it was a fabricated demand. There goes the sensex – 2100 points higher. The same thing can be done by these 20 persons to bring down the share prices.
Can you believe that these few big players earn both ways! When the market falls they earn because before the fall they have offloaded (sold) their stocks and shares at the higher price. When the market rises they earn because before the rise they have bought up stocks and shares at the lower price. In fact every fluctuation is to their benefit. The more the ups and downs, the better for them. If you see on the TV screen that investors gained 6.5 lakh crore rupees, a very large part went to the coffers of these few big players. If you are told that investors lost a lakh crore rupees, trust that these few big players lost nothing. In fact they will buy at low price and thereby benefit.
If on Sunday the 17th May when the prices were still low, the Ambanis purchased shares of their own company and that of many other companies. On the very next morning they are richer by several hundred crores. They will sell these shares in a way that they get the inflated price. The poor investor will not sell his shares because greed tells him that the prices will rise further. In fact he will buy up the shares off loaded by the capitalists. The whole game is that a few control the market and hence gain, while the majority don’t have any control and hence lose. Big sharks know that greed will keep bringing in newer gamblers. In Islam, gamble is defined as an unpredictable transaction in which many lose and few gain.
When gains from simple gambling were not enough, the predators invented and introduced derivatives – a gamble over gamble. Now they could make profits today for a future push or pull of the market. For example, these predators can say for sure that during the next one year they will push up the market thrice and pull it down thrice. So they are bound to make profits six times. They just have to notionally buy shares at low prices before the push-up and sell them the next day at the higher price. Similarly, they just have to sell off their shares at high prices before the crash and buy them the next day at rock bottom price. For them everything is predictable because they are doing it.
Allah swt says in the holy Qur'an:
وَإِنَّ أَوْهَنَ الْبُيُوتِ لَبَيْتُ الْعَنْكَبُوتِ
"But Verily, the frailest (weakest) of houses is the spider's house"[029:041]
Allah says that the weakest of homes is the web of the spider.
It’s a structure without foundations. Stock markets are weaker than the spider’s web. These markets are one example of the capitalist economy that is entirely built on faulty foundations. Greed, lies, self interests, gambling, usury (riba) and deceit together make up the capitalist ideology. Despite the back-breaking downturn, crippling almost all countries of the world, one can vouch with certainty that nothing can change for the better till this ideology exists. Only when Islam comes forward as a viable alternative, will this corrupt and cruel ideology be knocked off. After their own economists have lost faith in the principles of capitalism and after breaking their heads to find a solution, they are now grappling with the idea of infusing fresh blood by incorporating principles of socialism from the communist ideology like nationalization, government intervention & regulation, forgetting for a moment that communism is itself dead wood and antithetical to the capitalist ideology. If you cling onto a sinking ship, you can’t expect to be saved.