The dark side of the Indian stock market
There is a famous dialogue of scam 1992 web series that the stock market is that thing, which can satisfy the need for money for the whole country, which is true. But if that is true then from every 10 people who invest in the stock market, why do 7 people lose money? another hidden dark side of the stock market.
STOCk market manipulation
Today everyone praises the stock market and keeps an image of it like, that you invest, earn and enjoy but the reality is something else. And the dark side of it is so bad that you cannot imagine. There are many scams in the stock market that can take your life savings in one go. But have you ever thought about how all these things is happening too easily? And if it is happening then why is no one stopping it most importantly, what we can do on our personal level so that we don’t get stuck in this type of thing, So, if you want to be safe from any scam then you have to understand how the scam works.
How is stock manipulation done?
You will see mainly these three things in the stock market, 1st Stock manipulation. How is stock manipulation done? To understand this we have to understand how the stock market works. So basic stock market works like this whenever a company needs money, then that company takes money from the General public. In return, the public gets that company’s share. And whenever someone purchases a company’s share then they have 2 ways to earn profit.1st capital gain. Assume you buy a stock on 100rs. and sell it for 200 rs. Then the remaining profit is your capital gain. In spite of this many do intraday too. Suppose today I bought some share, and when its price increased today, then I sold it. In that too whatever gain you earn is your short-term capital gain. And another way is dividends. Whenever a company makes a profit then it has an option, that it can share some portion of the profit with its shareholders, which is also called dividends. Now, how does a company’s stock price go up or down? Well, there are 2 factors included in it. 1st Company’s performance. How is the company performing? Is the company in loss or profit? and 2nd demand and supply, which are mainly controlled by market greed and fear. This means if there is much greed in the market then any stock price will hike up instantly. Why? because people demand stock very much but supply is less. And in some way, if the supply is more but demand is not much then, that stock price will fall. Now, most important any stock’s price, is manipulated how?
There can be anything from these 2 in stock manipulation, 1st company fundamentals mean to manipulate the company’s financial figures, changed them, either showed too much profit or hide the losses. Or many times it happens that related party transactions are done in the company. This means the company’s promotors, transfer the money into their family members’ accounts, then convert them into cash, and show fake bills of this transaction in the company.
Now if any company’s fundamental is strong then the stock price of that company will increase. and if the fundamentals are weak then it will fall. And the 2nd way of manipulation is, is volume control, in simple words, the stock’s trade volume is being manipulated, or controlled by you in some way.
It further has 2 things. 1st, Institutional pumping, means the institutional investors buy any stock in bulk or sell any stock in bulk. So, in this condition either the stock price will hike up or will fall. And 2nd, Retail pumping in which people like you and me, start buying or selling a particular stock. Now, How is the retail pumping done?
Well, there is an old trick which is known as paid media. You give money to any big media house, And that media house starts saying good things about that particular stock. by which many will think to invest in that stock is good and that crores of people will start investing in that particular stock. And the price of that stock will hike up instantly. And this same thing can be done vice versa, give money to some media house, and start defaming a particular stock due to which people will start panic selling it, and its stock price will fall. And 2nd convenient way is social media.
You have noticed there are many WhatsApp groups, and Instagram pages, where different kinds of stock tips are given. Different kind of information is given on different kind of stocks. Many of us, without confirming that information, starts buying or selling that particular stock. due to which this stock manipulation is normal too. Now, the 2nd most dangerous thing which is going on in the market.
which is stock market tips. But the question is why is it too dangerous?
Today you can find some people on the street corner, some WhatsApp groups, some telegram groups, and many agencies too who will tell you that, we will provide a different kinds of stock tips from which you will make profit guaranteed. And many in the greed of this join this groups. Now see how it works. In this group you are not alone there are many like you. Now whoever runs this group divides this group into equal audiences. for example, some group has 10 lakh people in it. Then there will be 2 divisions of 5 lakh. Group A and Group B then what they do is they say Group A to sell a particular stock. And says to group B to buy that particular stock. Now 5 lakh people started selling that stock and another 5 started buying it. Now any one group will make a loss and any one group will make a good profit. Now the group which made a profit is again then divided into 2 groups.
So at first, the total audience is 10 lakhs, then groups of 5-5 lakhs were made. after that only 5 lakh remained. Now this audience was further divided into 2.5 lakh groups And again the same process was repeated. Now, what will happen in this? The people will trust this platform, this particular group. And this is where the real game begins. Because you have made some good profit 2-3 times, So you have started trusting this group. That the tip we get, that tip is genuine, then this group will offer you some premium group or premium membership which is on 1 lakh, 2 lakh, 3 lakh or sometimes five lakh. And interestingly you buy this membership at once because you now trust it. That whatever money I will invest I am earning profit from it too. So within 1 or 2 days whatever the money I invested, will easily return. And as soon as you give money to them then there will be a blast, Your number gets blocked. And there goes your money. If you genuinely want to analyze whether these groups are original or fake, then do your own technical analysis. Analysis chart pattern and see for yourself whether something is happening actually or not? and there is one more way to catch these things. 99% of the groups, recommend the penny stocks, of which the company’s market capitalization is very less.
which are not that big of a company. Now it happens because to any penny stock, can be easily manipulated by 5-10 lakh people. But if there is some big company whose market cap is big, you won’t be able to move it. hence in this kind of group, you will mostly get penny stocks recommendation. And if something like it is happening then be alert then, Now all this is going on but in the stock market, one more thing is there which is the most, and the most easiest way, which is insider training. Which is illegal. Insider trading means a company’s information that is not available in the public domain, using that you are earning your profits and the irony is to catch that thing is tough. because in many cases you won’t be able to find, where this information is sent where, and who used it, now insider trading is done 2 ways. 1st a short way, which his friends and family, you heard it from someone, some friend asked someone from your family that what is going on basis of that you did some trading, some investing, due to which you got profit. It is illegal but people do it. 2nd way is majorly operated on big scales which is known as moles. Many people plant some people in companies which give them information, by using which, they place trades and earn profits. If you have seen the Bazar movie, then the Shakun Kothari in it, earns so much profit because he has moles in many companies. who brings information to him. Earlier there were no digital brokers only normal brokers.
who used to invest the money of others in any stock. then they make a loss and then they used to say that the stock market is a gamble. The stock market makes losses, don’t invest here. All the things I said happens a lot in the stock market. someone takes your money by giving tip or someone by pump and dump. which is bear by normal people. In reality, the stock market is no gamble, but a good way for us to create good wealth in long term.
SMART INVESTMENT
Everyone wants to be rich and a millionaire today, and there is nothing wrong with it but the greed to get it quickly, due to which people get stuck in bad things. And honestly, if you want to invest in the stock market, then I would suggest you do it. But in other’s saying, by taking a tip from anyone don’t invest. If you want to invest then analyze the company properly. Understand how their business works, and then invest in the particular company. and if you invest in any company by properly thinking and analyzing then I can guarantee you one thing whether you make a profit or not, but you will definitely get one thing that is you will understand, that how you analyze any business. And how business work. The biggest problem today is people want to invest in the stock, and not in companies or their businesses.
