NSE warns against Pump and Dump scam; how to protect yourself | A guide
The National Stock Exchange of India (NSE) has released guidelines and advised investors to remain alert against 'pump and dump' stock market scams. These scamsters get involve in artificially inflating stock prices with false information, leading to significant investor losses when the price crashes.
Mumbai: NSE has issued guidelines for stock market investors to educate them about ‘Pump and dump’ scams. In an attempt to caution the investors about such scams, the exchange said that scamsters use manipulative tactics to artificially increase a stock’s price using false information and then sell when the stock price is at the peak. This tactic leaves several investors with heavy losses.
NSE India has released some do’s and dont’s so that investors are in knowledge of how these tactics work, the risks involved, and how they can stay protected.
Pump and Dump Scam
Pump and Dump Scam is a fraudulent practice that may leave investors with significant losses. Scammers buy stocks in large quantities and then artificially inflate the price using fake news and hype. Scammers then sell these shares which results in crashing of the prices. The fraudulent practice is common in penny stocks.
How Pump and Dump Scam works
Scammers buy stock (low priced)
Create fake buzz
Stock price rises
Scammers sell
Prices crash leading to investors losses
How can investors protect themselves from Dump and Pump scam
- Verify the information of stock from official sources like company website of NSE, BSE, etc
- Avoid buying shares based on tips from unknown sources and social media influencers
- Report suspicious activity to feedbk_invg@nse.co.in
- While investing in the stock market, it is always good to consult a SEBI registered Research analyst.
Recently, Sebi released a study stating that 9 out of 10 individuals are incurring losses in Futures & Options (F&O) trades. The market regulator mentioned that the net losses of retail traders went up by 41 percent to Rs 1,05,603 crore in FY25 from Rs 74,812 crore in FY24, after accounting for transaction costs. "The percentage of traders making losses in EDS remained broadly unchanged at 91per cent from earlier study done by SEBI,” it stated.
Annual profits and losses of individual traders in EDS –FY22 to FY25
| Year | Net Profit (rs crore) | No. of traders (lakhs) | Lossmakers(%) | Average per person P&L(Rs) |
|---|---|---|---|---|
| FY22 | -40824 | 42.7 | 90.20% | -95517 |
| FY23 | -65747 | 58.4 | 91.70% | -112677 |
| FY24 | -74812 | 86.3 | 91.10% | -86728 |
| FY25 | -105603 | 96 | 91.00% | -110069 |
| Y-O-Y Change | 41.00% | 11.00% | NA | 27.00% |
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