Biggest Stock Market Frauds in India: Understanding Past Scandals and Lessons for Investors

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Last Updated on February 26, 2023 by Wenivesh Team

The stock market is a critical component of the Indian economy and plays a vital role in driving economic growth. It is a place where individuals and companies can invest their money to earn returns on their investments. However, over the years, the Indian stock market has witnessed several instances of fraud and scams, which have caused significant losses to investors. In this article, we will discuss some of the biggest stock market frauds in India.

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1. Harshad Mehta Scam

The Harshad Mehta Scam is one of the most notorious stock market scams in India’s history. Harshad Mehta was a stockbroker who manipulated the stock market by taking advantage of the loopholes in the banking system. He used bank receipts to buy shares, which he then sold at a higher price, causing a massive rise in the stock market. However, when the scam was discovered, the market crashed, causing losses to investors.

2. Satyam Scam

The Satyam Scam was one of the biggest corporate frauds in India, where the company’s founder, Ramalinga Raju, manipulated the company’s books to show inflated profits. The scam caused significant losses to investors, and the company’s stock price plummeted. The scam was discovered when Ramalinga Raju confessed to the fraud, and he, along with his brother, were arrested.

3. Ketan Parekh Scam

Ketan Parekh was a stockbroker who operated a massive fraud scheme in the Indian stock market in the late 1990s and early 2000s. He used borrowed funds to invest in the stock market and manipulated the market by buying and selling shares in companies he owned. The scam came to light in 2001 when the stock market crashed, and Ketan Parekh was arrested.

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4. NSEL Scam

The NSEL Scam is one of the most significant scams in the history of Indian commodities trading. The scam involved the National Spot Exchange Limited, where the company’s promoters manipulated the trading volumes and prices of commodities such as gold and silver. The scam was discovered in 2013, and the company was subsequently shut down.

5. Sahara Scam

The Sahara Scam involved two Sahara group companies, which raised money from investors through optionally fully convertible debentures (OFCDs). The companies were not authorized to raise money through this scheme, and the money raised was used for personal purposes. The scam caused significant losses to investors, and the Securities and Exchange Board of India (SEBI) ordered the companies to refund the money raised.

Conclusion

Stock market frauds in India have caused significant losses to investors, and it is essential to be aware of these scams to make informed investment decisions. The government and regulatory bodies such as SEBI have taken measures to prevent such frauds from happening again. However, it is crucial to be cautious while investing in the stock market and do proper research before investing your money.


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