The Indian stock market has seen exponential growth over the past decade, drawing in millions of new investors. With the rise of digital platforms and easy access to trading tools, participating in the market has never been more convenient. But alongside this boom comes a darker side — a breeding ground for fraud and manipulation. Understanding common stock market scams in India is not just wise; it’s essential for protecting your hard-earned money.

1. Pump and Dump Schemes

One of the oldest tricks in the book, pump and dump scams involve artificially inflating the price of a low-volume or penny stock through misleading news, tips, or hype on social media and messaging platforms. Once enough investors jump in and the price rises, the scamsters "dump" their holdings at a profit, leaving unsuspecting investors holding worthless stock as the price crashes.

Red flag: Too-good-to-be-true stock tips promising multi bagger returns in a short time — especially via WhatsApp, Telegram, or YouTube.

2. Fake Advisory Services

Many self-proclaimed market “gurus” offer paid advisory services, promising guaranteed profits, insider tips, or exclusive market insights. These services often charge hefty subscription fees and may lure investors with fabricated testimonials and screenshots of manipulated profits.

Red flag: Promises of guaranteed returns — no legitimate advisor can assure profits in the market.

3. Front Running

This unethical practice involves brokers or insiders placing their own trades before executing large client orders. Because large trades can influence stock prices, front runners benefit from the subsequent price movements, while the client gets a less favorable deal.

Red flag: Brokers recommending trades with unusually high urgency or volume.

4. Circular Trading

In circular trading, a group of traders collude to buy and sell shares among themselves to create artificial volume and price movement. This misleading activity gives the illusion of strong interest in a stock, attracting retail investors — who then suffer losses when the fake volume disappears.

Red flag: Sudden spikes in volume and price in otherwise illiquid stocks without any news or fundamentals.

5. Pre-IPO Scams

Scammers often promise access to “exclusive” pre-IPO shares of high-profile companies. Investors are enticed to buy these shares before the company goes public, usually through unregulated or unverifiable channels. In many cases, these shares either don’t exist or are grossly overpriced.

Red flag: Unofficial or unverifiable offers to buy pre-IPO shares at a premium.

How to Stay Safe

• Verify SEBI registration for all advisors and platforms.
  
  

• Ignore unsolicited tips from strangers or unverified sources.
  
  

• Use only trusted brokers and trading apps regulated by SEBI.
  
  

• Do your own research before making any investment decisions.
  
  

• Be cautious with FOMO (fear of missing out)—if it feels rushed or emotional, step back.
  
  

Disclaimer: This article is for educational purposes only. Investors should conduct their own research or consult a registered financial advisor before making any investment decisions.