Biggest Scams in the Indian Stock Market: India has a history of financial scams. A scam is a method of obtaining money by deceit or illegal methods, such as the use of a fictitious name or papers.

There have been several financial scandals in India that have rattled Dalal Street, and some of these have resulted in significant financial hardship for the average person. The Securities Exchange Board of India has revived rules and regulations to close vulnerabilities in the securities industry.

A number of high-profile frauds have shaken the Indian stock market over the years, but we’ll take a look at five of the biggest scams in the Indian stock market.

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List of Biggest Scams in the Indian Stock Market

The following is a List of Biggest Scams in the Indian Stock Market, stay tuned to find out more.

1. Scam of Harshad Mehta

Harshad Mehta, a stockbroker, began working as a mediator during the first decade of the 1990s to facilitate exchanges of ready-forward trades that were being conducted between Indian banks.

During this procedure, he would unlawfully invest an identical amount of money into the stocks listed on the Bombay stock market to inflate the stock values falsely. He would then use the money he had obtained from the banks to raise further cash.

As a direct result of this unethical behavior, Sensex rose at a rapid rate and reached 4,500 points in a very short amount of time. When retail investors saw the quick surge in the market, they began to experience feelings of temptation.

Many investors started doing so when people realized they could make rapid money by putting their money in the stock market.

It is believed that Harshad Mehta moved around 5000 crore rupees from the Indian banking sector to the Bombay stock market throughout the period from April 1991 to May 1992. This transaction took place in India.

Following the exposure of the fraudulent activity, the Indian stock market had a precipitous decline as a direct consequence. And as one would have imagined, Harshad was not in a position to return the millions of rupees in cash borrowed from Indian banks.

This made it one of the biggest scams in the Indian stock market today.

The honorable court sentenced Harshad Mehta to nine years in prison and banned him from doing anything related to trading shares for the rest of his life.

Quick Read: Is Swiggy Listed In Stock Market? Funding, IPO, and Acquisitions!

2. Scam of Ketan Parekh

Following the Harshad Mehta fraud, an accountant known as “Ketan Parekh” devised similar schemes. Harshad Mehta was Ketan’s boss when he was a trainee, so Ketan is also known as the successor to Mehta’s fraud method.

On the other hand, Ketan Parekh wanted to raise money from a variety of sources, including banks. As with Harshad Mehta, he would artificially increase stock values. After the Mumbai stock market, Ketan Parekh was engaged in the Calcutta stock market and the Allahabad stock market.

However, Parekh preferred to focus on ten particular equities, known as the K-10 stocks. Using circular trading, he was able to inflate the stock values of his clients artificially.

The proprietors of several businesses paid him to boost their stock values in the market, which could astound you. After the 2001 Union budget was released, Sensex fell by 176 points on the NYSE. The Indian government conducted a thorough inquiry into this incident.

Then, Ketan Parekh was finally found out to be the architect of this fraud by the banking institution, and he was banned from participating in Indian stock markets till 2017.

3. Satyam Fraud

SCSL’s Chairman, Satyam Ramalinga Raju, admitted to SEBI that he had manipulated the company’s financial records to benefit himself. This business scandal raged on from 2003 through 2008. It is said that the company lied about sales and profit margins to the tune of about Rs 5,000 crores.

Satyam’s stock price dropped significantly after this occurrence. In the end, the CBI was given the task of investigating the incident. Satyam has been accused of committing a series of misdemeanors. These three partial charges were then combined into a single blotter, which was then used.

The honorable court condemned Raju and nine others to prison in April 2009 for their roles in one of the biggest scams in the Indian stock market. As a result, Mahindra Satyam was purchased by the Mahindra Group and renamed Mahindra Satyam. Afterward, Mahindra Group acquired it in 2013.

4. The Jignesh Shah NSEL Scam

In 2013, it was discovered that industrialist Jignesh Shah had been running a fraudulent scheme. He was the founder of National Spot Exchange Limited (NSEL), a corporation that offered farmers and dealers an electronic platform for spot trading in agricultural goods and bullion.

NSEL gave this platform. However, the commodities that were exchanged on NSEL could not be located in the warehouses where they were stored.

There were over 13,000 victims of financial loss due to the alleged unethical behavior of the directors and administrators of the NSEL, and the total sum of the fraud was a staggering Rs. 5600 crore.

5. The Satyam Ramalinga Raju Scam

In 2009, the chairman of Satyam Computer Services, Byrraju Ramalinga Raju, admitted that the company’s financial records had been fabricated. He said to SEBI that the activity in question took place between the years 2003 and 2008 and that the sum involved was at least 5000 crores of Indian rupees.

The corporation deceived its board of directors, stock exchanges, regulatory agencies, investors, and any other parties that had an interest in its business by fabricating its financial statements.

This was carried out with the knowledge and complicity of both the auditors and chartered accountants. In the end, the judge decided to hand down a sentence of seven years in prison and a fine of five crore rupees for Raju.

Also Read Satyam Scam – The Story of India’s Biggest Corporate Fraud!

In Closing

The above-mentioned are five of the biggest scams in the Indian stock market, and they indeed shook the Indian financial markets. These scams are so elaborate and well planned that it is almost impossible for any investor to detect them.

However, proper guidance and lessons learned from the many scams that have rocked the market can help any investor avoid such scams. So, That’s all for the article on Biggest Scams in the Indian Stock Market, We hope you liked it. Happy Investing!

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