Introduction:
You ever have this feeling that a stock is flying high for nothing, and suddenly. boom! it crashes like anything? More often than you might think!
If you’re keen on smart investing, especially if you learning through share market classes in pune, you want to know about market manipulation and how it occurs. Because mate, the market is not necessarily fair — and you should be ready.
What Exactly is Market Manipulation
In plain language, market manipulation is when an individual artificially raises or lowers a stock price to give a false impression of its worth. Their ultimate objective? To ensnare unsuspecting investors like you and me.
Manipulators can be anyone — large players, insiders, or sometimes secretly conspiring groups.
Popular Types of Stock Market Manipulation
Following are some of the underhanded tricks you need to know:
- Pump and Dump: Fake news spreads, stock price rises, insiders sell, public loses money.
- Short and Distort: Bad rumors are floated to crash a stock price.
- Wash Trading: Buying and selling between same groups to create fake volume.
- Circular Trading: A group of people keep buying and selling among themselves.
Signs You’re Falling into a Stock Trap
Watch out for these signals:
- Sudden rise in stock price without any major news
- Astounding trade volumes for no apparent reason
- Tip-offs anonymously sent from “expert stocksmen” by WhatsApp or Telegram ?
- Irrelevant fantasies such as “double money within 15 days”
- Absence of fundamentals yet high levels of promotions
Real-Life Examples of Manipulation in Indian Markets
- Let’s not forget the Satyam Computers scandal?
Phantom incomes, doctored books. Retaining small investors crushed.
- Client securities being pled at illegal interest rates by Karvy Stock Broking scam.
- Certain “penny stocks” regularly kept rigged these days to achieve sudden pump-and-dumps.
How SEBI Fights Stock Manipulation
- SEBI maintains close vigil on abnormal price movements.
- Unusual stocks find themselves under Surveillance Measures such as GSM or ASM list.
- Heavy fines and even bans are levied on manipulators.
- But even SEBI cannot catch all at once. So you, my friend, gotta be on your toes.
Tips to Avoid Getting Caught
- Always do your own research on the company’s fundamentals.
- Don’t believe anonymous tips or too-good-to-be-true rumors.
- Be particularly cautious with small-cap and penny stocks.
- Invest behind good track record and governance companies.
- Confirm news from authentic sources such as company filings, not social media.
Case Study: Pump and Dump Scam in India
- Earlier in 2020, a relatively unknown IT company stock appreciated 500% in 2 months.
- Individuals jumped in with returns, but operators behind the scenes slowly dumped their holdings.
- Stock price plummeted by 80% subsequently.
- Hundred of retail investors lost lakhs overnight. Sad reality!
Conclusion
Market manipulation is, unfortunately, a reality of the investing world. But if you remain smart, vigilant, and construct your knowledge through sites like share market courses in pcmc, you can sidestep most of these pitfalls.
Always keep in mind — quick money has quicker risks.
FAQs
Q1: What is market manipulation in stock market?
Market manipulation is the artificial movement of stock prices for individual benefit, usually by the dissemination of false news or the generation of false trading volumes.
Q2: How does SEBI identify manipulators?
SEBI monitors unusual price and volume movements and tracks suspicious behavior with surveillance tools.
Q3: Are penny stocks dangerous for novices?
Yes, most penny stocks are very volatile and subject to manipulation. Novices must be even more careful.
Q4: How can I ensure that a movement in a stock is real?
Look for good news, quarter results, announcement by the company, and genuine SEBI notifications.