3 Common Scams To Be Aware Of In The Indian Stock Market

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  • 13 Apr 2023

Investing in the Indian stock market is a lucrative proposition. Just be wary of scams. Many traders have lost money due to share market scams and fraud.

Common Stock Market Scams

1. Tip registration fraud

Unscrupulous stock market traders may assure you of yearly returns of over 40% if you register with them. But no one, not even Warren Buffet, earns more than about 20% a year!

These scamsters ask you to pay a registration fee in return for the best investment tips. Stay away from their tall promises.

2. Fake news about penny stocks

The penny stock segment is a frequent target of scams. A common tactic is to send fake news articles to investors.

For instance, a fake news article might state that a microcap company is being taken over by a large conglomerate. Here, the fraudsters themselves buy huge volumes of this stock beforehand. Believing the news, a large number of unsuspecting investors may also try to purchase the stocks.

Once the demand goes up, the culprits immediately sell their stocks. This makes the prices very volatile and it leads to losses for honest investors.

Related: Why do stock prices fluctuate?

3. Fake messages

Fraudulent traders may hack into your broker’s account. They may send fake messages related to the prices of some stocks. They do this to manipulate the prices of certain bulk stocks.

The fake messages may be sent to a large pool of the genuine broker’s customers. Thinking the messages to be true and trustworthy, investors may act accordingly, only to lose money later on.

How do you stay away from such scams? It may help to speak with your broker before investing. Carry out your own independent research as well.

Summing Up

All of these scams are quite common in the Indian stock market. Avoid falling prey to such fraudulent activity by staying informed and cautious.

It may help to open a trading account with a reliable and secure broker like Kotak Securities. That way, you also gain access to the latest news and market research.

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