Pump and Dump Scheme in India: How to Spot and Avoid the Trap

Introduction: The Stock That Made You Greedy

Ever seen a ₹5 stock shoot up to ₹250 in just two months? The internet calls it a “hidden gem,” Telegram gurus scream “next multibagger!”, and your gut whispers, “Buy now, or regret forever.”

And just when you finally buy in—it crashes.

Welcome to the world of pump and dump schemes—where stock prices are inflated with hype, only to be dumped on unsuspecting investors like you.

These scams aren’t just in shady corners of the market. They’re happening right here in India. From YouTube influencers promoting fake stories, to Telegram groups pushing low-volume stocks, pump and dump schemes are becoming more sophisticated—and more dangerous.

SEBI has been busy too. In the last couple of years, we’ve seen high-profile cases involving celebrities, finance channels, and even SME-listed companies. The results? Fines, bans, and a lot of investors left holding worthless shares.

In this blog, we’ll break down:

• What a pump and dump scheme really is
• How recent scams fooled thousands of investors
• Red flags you must watch out for
• And most importantly—how to protect your hard-earned money

Because in the stock market, the only thing that pumps for free… is your greed.

What Is a Pump and Dump Scheme?

A pump and dump scheme is one of the oldest scams in the stock market—and unfortunately, it’s still fooling investors today.

Here’s how it works:

1. Pump:
   A group of operators buys a large number of shares in a low-volume, low-priced stock—usually a penny stock or SME-listed company. They then create fake hype using social media, WhatsApp tips, YouTube videos, or paid news articles. The goal? To attract retail investors like you.
2. Retail FOMO:
   As the stock starts hitting upper circuits, more people jump in. The price keeps going up, and everyone believes it’s “the next multibagger.” That’s when the original manipulators start dumping.
3. Dump:
   Once the price is high enough, the scammers sell off all their holdings, booking massive profits. With no one left to buy, the stock crashes. Retail investors are left stuck—holding shares no one wants.

This scheme works especially well in:

• Illiquid stocks with low trading volumes
• Companies with no real business or news flow
• Stocks that are easily manipulated due to low public float

What makes it more dangerous now is the rise of social media stock “experts” and financial influencers with no accountability. Many scams in India—like Sadhna Broadcast and Svarnim Trade Udyog—used YouTube and Telegram to pull in lakhs of investors.

Bottom line?
If a stock is being hyped without fundamentals to back it, chances are you’re not early—you’re the exit strategy.

Real Pump and Dump Scams in India

Pump and dump schemes are no longer just textbook frauds—they’re happening in real-time, and even celebrities are getting caught in the act. Let’s look at five real cases where investors were misled, and SEBI had to step in.

1. Sadhna Broadcast & Sharpline Broadcast Scam (2023)

What Happened:
Influencers, including Bollywood actor Arshad Warsi and his wife Maria Goretti, were accused of promoting these two micro-cap stocks via misleading YouTube videos. These videos falsely claimed that major foreign investments and big developments were coming.

The Result:
The share prices of both stocks shot up 1,000–2,000% in a few months. Thousands of retail investors entered at high prices.

SEBI’s Action:

• Barred 31 individuals, including Arshad Warsi
• Froze profits and ordered disgorgement
• Declared it a classic pump and dump using “fake financial influencers”

2. Svarnim Trade Udyog (2024)

What Happened:
The promoters and operators used Telegram groups to create buying hype. False tips and guaranteed return messages were circulated to pump up the stock.

The Result:
The stock price doubled in days, hitting upper circuits repeatedly. When volume peaked, the manipulators dumped their shares.

SEBI’s Action:

• Fined 11 individuals ₹7.75 crore
• Ordered return of ₹92.37 lakh with interest
• Found “pre-planned manipulation targeting retail greed”

3. Pacheli Industrial Finance (2025)

What Happened:
Listed on the SME platform, this company saw its stock price rise steeply without any improvement in business fundamentals. The rally was triggered by coordinated buying and vague corporate announcements.

SEBI’s Action:

• Barred the company and six others from the securities market
• Launched a probe into SME listing abuse

4. Bharat Global Developers (2024)

What Happened:
This micro-cap stock went up 10,000% in just one year. The reason? False disclosures and unaudited press releases filed on exchange portals.

SEBI’s Action:

• Suspended trading
• Penalized all entities involved
• Warned exchanges to monitor disclosures more carefully

5. LS Industries (2025)

What Happened:
This stock jumped from ₹22.50 to ₹267.50 in just two months without any credible news. Investigation revealed that it was manipulated using dummy accounts and circular trading.

SEBI’s Action:

• Froze gains of suspected manipulators
• Termed it a well-orchestrated pump and dump operation

The Pattern Is Clear:

• Sudden price spikes
• Fake news or influencer hype
• Dumping once retail volume surges
• Retail investors left trapped in illiquid, crashing stocks

These aren’t stories from the US or crypto—this is happening in Indian stock markets, and SEBI is working overtime to catch them. But as investors, it’s your job to stay alert.

Next, we’ll learn how to identify a pump and dump scheme before it burns your portfolio.

How to Identify a Pump and Dump Scheme

Spotting a pump and dump scheme isn’t about having insider info—it’s about recognizing the patterns. These scams leave clues if you know what to look for.

Here’s how you can identify one before it traps your money:

1. Sudden Price Spike Without Any News

If a stock jumps 40–100% in a few days with no business update, no earnings release, and no big deal announcement, be suspicious. Sharp rallies in micro-cap stocks often signal something fishy.

2. Repeated Upper Circuits + Low Volume

Penny stocks that hit upper circuits for 5–10 days in a row, but have low traded volume, are likely being pumped. If you can’t buy or sell freely—it’s a liquidity trap.

3. Too Much Hype on Social Media

If you see the same stock tip being shared on Telegram, YouTube, WhatsApp groups, or finance Twitter, especially with phrases like “hidden gem” or “next multibagger”—chances are it’s coordinated.

4. Company Has No Real Business or Weak Fundamentals

Check financials. If the company has:

• No clear revenue model
• No profitability
• Suspiciously high valuations
• Or hasn’t filed audited results in years…
  …you’re likely looking at a pump-and-dump candidate.

5. Fake News or Disclosures

Some companies file misleading updates with exchanges—like vague “MOU signed” announcements or planned “foreign investments” that never materialize. If it sounds too good to be true, verify through SEBI, BSE/NSE, or company filings.

Tools to Help You Investigate:

• Screener.in – check balance sheets, profit trends
• Trendlyne / TickerTape – price and volume insights
• BSE/NSE Announcements tab – for real disclosures
• SEBI Orders page – see if the company has faced penalties

Golden rule?
When a stock is being talked about everywhere, but there’s nothing real backing it—you’re not early. You’re being baited.

Next, we’ll dive into how to protect yourself from falling into these traps—especially in a market where scams are getting smarter.

How to Protect Yourself as a Retail Investor

Pump and dump schemes rely on one thing—your fear of missing out. The best way to avoid becoming someone else’s exit strategy is to follow a few simple rules.

First, never buy based on tips from Telegram, YouTube, or WhatsApp—especially when the source is anonymous or screaming “10x in 1 month.” If there’s no real research, it’s just bait.

Second, check what the company actually does. No revenue? Zero profit? No audited results? Big red flag. Use tools like Screener.in or the BSE website to do your homework.

If a stock is hitting upper circuits every day without any news—it’s not a sign of strength. It’s likely a trap. Illiquid stocks are the perfect playground for manipulators because once the music stops, there’s no exit.

Avoid blindly jumping into SME stocks or thinly traded microcaps unless you understand the business and risks.

Also, do a quick search: “[Company Name] SEBI Order”. If it’s been flagged or fined before, skip it.

And finally, treat tip-based stocks as junk food—a small taste at best, never a full meal. If you’re going to take the risk, keep it under 2–3% of your total portfolio.

In short: Stay skeptical, do your research, and never invest just because someone told you to.

Why SEBI Is Cracking Down Hard

India’s stock market has seen a flood of new retail investors in the last few years—and with that came a wave of pump and dump scams.

SEBI (Securities and Exchange Board of India) is now on high alert.

In many recent scams—from Sadhna Broadcast to Bharat Global Developers—social media was used as the primary weapon. Stocks were hyped on YouTube, Telegram, and finance influencer channels, triggering a retail buying frenzy. Once the price was pumped high enough, the manipulators dumped their shares—leaving investors stuck.

SEBI’s response? Swift and public.

They’ve:

• Banned dozens of operators and influencers
• Froze profits and imposed heavy fines
• Introduced stricter monitoring of SME listings and corporate disclosures
• Started targeting misleading financial influencers

More importantly, SEBI is naming and shaming manipulators to warn investors and discourage future scams.

While regulation alone can’t stop every fraud, it sends a strong signal: pump-and-dump is no longer a soft crime.

But no matter how strict the regulator gets, your best protection is still your own awareness.

Conclusion: When Returns Look Unreal, They Probably Are

Pump and dump schemes are clever, fast, and brutal. They prey on one thing—your desire to get rich, quickly.

The stocks look tempting: low price, rapid rise, and nonstop social media hype. But behind the scenes, someone is pulling the strings. And if you’re hearing about the stock on WhatsApp or YouTube, chances are—you’re already late to the party.

From Arshad Warsi’s YouTube-pumped penny stock to SME shares jumping 10,000% on fake news, India has seen enough real cases to know: this scam is real, and it’s here.

So what’s the smart move?

• Be skeptical of stocks with no fundamentals
• Ignore hype and unsolicited tips
• Do your own research
• And never invest money you can’t afford to lose

In the stock market, easy money often turns into expensive lessons.

If something sounds too good to be true—it probably is. So Avoid shady tips—invest smarter with Angel One’s trusted research tools and alerts.

FAQs: Pump and Dump Schemes

Q1. What is a pump and dump scheme?
It’s a stock market scam where a group inflates a stock’s price through false hype (“pump”) and then sells off their holdings at the top (“dump”), leaving retail investors with losses.

Q2. Are pump and dump schemes illegal in India?
Yes. SEBI considers them a serious violation of market integrity. Entities involved are fined, banned, and even face criminal charges.

Q3. How can I spot a pump and dump stock?
Look out for sudden price spikes, constant upper circuits, vague company news, and hype-heavy tips on Telegram or YouTube without real business updates.

Q4. What are some real examples in India?
Notable cases include Sadhna Broadcast (2023), Svarnim Trade Udyog (2024), and Pacheli Industrial Finance (2025), all penalized by SEBI for manipulation.

Q5. Should I invest in low-priced stocks being hyped online?
No. Avoid any stock promoted aggressively without fundamentals. It’s likely part of a pump and dump scheme.

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