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How To Be Aware of Scams &amp: Frauds In Stock Market While Investing

According to the studies, 4.3% of the Indians have the financial firepower to invest in the share market, and actually they are investing. If we create a list of king of share market than we must give a first rank to Premji and Associates, they invest total 253,000 Cr. in stock, the second rank goes to the Radhakrishnan Damani, his total investment in stock market is 202,200 Cr., and third king is the most famous personality Rakesh Jhunjhunwala, his share of investment is 23,000 Cr. They have a proper plan to invest such a huge capital into the share market, they have a diversified portfolio to diversify the risk.

Let’s discuss the three biggest scams of the share market;

The Harshad Mehta Scam (1992)

Harshad Mehta came to Mumbai with only Rs 40 in his pocket and explored his interest in the stock market. He worked with the stock market company for over a decade and after words in 1984 he started his own broking house named “GrowMore Research and Asset Management” Banks, sub brokers, investors, brokers, etc started work under his company and slowly he got the fame unlike other broking houses.

Read More: Financial Tips For Young Adults in 2022

And we all know the rest of the story. The entire 1992 scam was discovered and he was sentenced to 9 years in jail. Reportedly, he scammed the Indian bank’s worth Rs 5,000 crores.

The Ketan Parekh Scam

Ketan Parekh was a trainee under Harshad Mehta and spearheaded the second biggest scam in the Indian stock markets. While Harshad Mehta dealt with bank receipts, Ketan Parekh used Pay Orders to scam the Indian banks. He deployed ‘pump and dump’ and ‘circular trading’ strategies to inflate the prices of ten selected stocks, known as the K-10 stocks. And we also know his story. Furthermore, He was barred from stock market trading till 2017. It is estimated that the scam was close to Rs 40,000 Crores. The student clearly surpassed the master.

The Satyam Scam

Satyam computers, a Hyderabad based IT company was founded in 1987 by Mr Ramalinga Raju. It was India’s fastest growing IT company and was listed on the BSE in 1992 and on the NYSE in 2001.All was smooth sailing for Satyam computers, but the real estate boom turned out to be a bane for Mr Raju. Since he had inside information on the proposed Hyderabad metro route, he opened Maytas infrastructure and Maytas properties and started buying land around the proposed metro route. But he needed more money to buy more land. He then decided to inflate the stock prices by raising fake sale invoices, and also manipulated bank statements to show higher cash reserves. And with the fake sales he scammed Rs 14000 Cr.

Now, if we talk about the figures of scams while investing in the stock market there were 8700 cases of stock market scams during the year 2020, and in 2021 (until now) there were 7400 cases registered under the head of share market fraud/scam. But there are certain ways to keep yourself safe while investing in a stock market.

What You Can Do To Avoid An Investment Scam?
How to be aware of scams & frauds in Stock Market While Investing

There are certain ways to safely invest your capital in the stock market. So let us discuss How to be aware of scams & frauds in Stock Market While Investing.

Also Read: How Much I Need To Invest To Be Millionaire In Cryptocurrency

Ask A Question 

There are many fraud companies who contact you by purchasing the numbers list from the telecommunication companies. They call you and ask you to join their advisory companies and after winning your confidence they ask for your demat account numbers, OTPs and other confidential details. So, before trusting any company you need to ask them questions and make sure they are not fraud or scammers.

Research Before You Invest

Have you heard about the gray market? Nowadays many companies come with new and unique ideas and register themselves for the first step of entering in the NSE & BSE market; i.e. collecting initial public offerings. But actually they don’t do anything after IPO registration.

Do Not Share Your Confidential Details

Sharing bank details, demat account details, OTPs, and etc confidential details with the advisory firm and brokers will lead you towards the scams and frauds. Brokers may ask for every detail to make your investment transaction hassle free. But they use this information for their own purpose.

Protect Yourself Online

Online and social marketing sites offer a wealth of opportunity for fraudsters. For tips on how to protect yourself online see Protect Your Social Media Accounts. So, while surfing any social media platform or an online website you must need to beware of the fraudsters or scammers.

Be Wary Of Unsolicited Offers

Be especially careful if you receive an unsolicited pitch to invest in a company, or see it praised online, but can’t find current financial information about it from independent sources. It could be a “pump and dump” scheme. Be wary if someone recommends foreign or “off-shore” investments. If something goes wrong, it’s harder to find out what happened and to locate money sent abroad.


There are thousands of ways to attempt crime and fraud, but there is only one way to save yourself from such scams, that is beware of what you are doing and what you want to do. Be safe while making investment decisions or trusting any brokers or advisory firms. And do not forget investing in the stock market is not a crime but attempting fraud is a crime.

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