What is Pump and Dump Stocks?

A “pump and dump” is a market manipulation scheme in which a security is promoted through misleading or exaggerated claims to create buying interest and push its price higher. Those behind the scheme then sell their holdings, usually leaving other participants with losses when the price falls.

How to Identify Pump and Dump Stocks in India

No single indicator can confirm a pump-and-dump scheme. However, the following potential “warning signs” may be analysed:

• An unusually sharp price increase without corresponding fundamental developments

• Sudden and abnormal trading volume
• Promotional claims based on unverified information
• Heavy promotion through social media or messaging platforms
• Pressure to buy immediately or fear of missing out
• Ultra-low liquidity or limited publicly available information
• A sharp price decline after a period of aggressive promotion

Note: Such signs require further investigation. They do not automatically prove manipulation. In India, investors should also verify company disclosures and exchange filings before acting on promotional claims.

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