The Stock Market is indeed a massive beast which is difficult to understand and manipulate. Understanding behavioural finance is key to excel in the stock market. But most of the people buy or sell a stock because they want to follow the trend. This trend could be in favour of you sometimes but not always.
Today, I want to talk about some type of scam which is still prevailing in markets. These scams are difficult to trace therefore SEBI could not take action against the culprits. The main prey of these scams are Retail Investors, people like me and you. As I said the market is difficult to manipulate but some stocks which fall below 500 Cr market capitalization are much easier to manipulate compared to others.
Idea behind Scam
A promoter or related person referred as operator decides to double or triple money in short period of time less than 1 year. The operator decides to buy a particular stock in huge quantity but less than that which cannot come into limelight. Now, the operator starts to promote, he hires some agency for sending fake/scam messages to retail investors. This process keeps on going for 1 to 6 months. Within a month, stock prices start to take a hit and getting stuck at Upper Circuit daily. After few months, the operator starts selling his stake. The operator is very happy as he has already doubled his money and now sitting on huge profits.
Who get trapped?
Retail Investors get trapped in this scam. Once the stock operator decides to take his stakeout, stock start hitting Lower Circuit. Retail Investors start getting worried and they also start taking out money. Once this mass selling starts, the stock keeps hitting Lower Circuit and most of the retail investors get trapped.
See the fake/scam calls which I received in August 17.
Now check the market trend of these scripts.
My idea of posting this article is to help Retail Investors to avoid such cheap gimmicks and do not get trapped in such scam calls. There is nothing like easy money so stop becoming greedy and patiently wait for your investments to grow.
Credits for charts: TradingView