ARE YOU ACTING ON SMS TIPS? PUMP & DUMP STOCKS

By | 22nd February 2018

Values of most of the stocks GIVEN via SMS tips have actually fallen

Just now Your phone beeps. It is an Whatsapp message or SMS from a unknown number or stock broker. Top funds and financial institutions are buying shares of an XYZ co. The stock has risen dramatically from ₹3-4 levels to touch ₹13 and the broker said it will only move up from here. That’s the fantasy peddling all around stock market. The current picture is that the shares of Viji Finance are down more than 40% since the SMS tip on 25 January.
 
This is not just one case. Anybody who have connection with stocks or has a demat account gets such unsolicited tips. Investors who took the bait and bought Viji Finance shares are not even half as unlucky as some others. The share prices of Edynamics Solutions and Steel Exchange of India have dropped over 75% since these stocks were recommended through SMS.
 
These stocks have declined at a time when the Nifty or Sensex have done exceedingly too much. Even after the post-Budget correction, the Nifty and Sensex are trading 10-12% above their June-July 2017 levels. A Plain Jane index fund could have earned investors 10-12% instead of the 60-70% loss from these SMS scrips. The tips come from cartels of brokers and operators involved in stock price manipulation. 
 

Their modus operandi:

First pump up the stock price of dead stocks and then lure gullible investors to buy these stocks at high prices. The operator cartel (Investor group) gets hold of contact details of clients from stock brokers and trading portals and carpet the bomb with tips on SMS and social media ie. Whatsapp, Facebook, E-mails, Telegram Channel. Even if 5% of 10,000-odd recipients enters in the bait, they have around 500 investors to catch. Surprisingly, not only newbie (innocent) investors but also seasoned experienced sometimes fall for these trap.
Experts say that investors who are serious about making money from stocks should ignore SMS tips. It is better to invest in a bluechip stock even if the price is high than buy low-priced junk.
 

“The love for low-priced stocks is the tragedy of the small investor. After he misses the opportunity to invest in good quality stocks at low prices, he jumps in late and invests on the basis of tips from dubious brokers,” says veteran investor Vijay Kedia.

To be fair, it is difficult for newbie investors to separate the stones from the grain when it comes to stock recommendations. The SMS tipsters mask their identities or use parody accounts to send the tips.

“It is routine for tipsters to use the name of well known equity research firm or brokerage house to gain the trust of the victim,” says Nikhil Kamath, head of trading at Zerodha.

Though the phone numbers that send these SMS tips can be identified, complaints to the telecom regulator and stocks exchanges have yielded little.

“We complained against a group that was using our company’s name to recommend stocks, but nothing came out of it,” says Kamath.

 

He adds that whenever they discover that a cartel is trying to create a buzz around a certain stock, they block trading in the scrip by Zerodha customers. “This way our clients won’t buy these dud stocks and lose money.”

 

 

 

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Disclaimer:

My descriptions, videos, presentations are only for educational and information purposes and under no circumstances should be used for making investment decisions. I cannot guarantee the accuracy of any information provided.
The stocks picks are based on my own research and personal views and sometimes are from newspapers, tv channel program, magazines, etc. No part of compensation is or will be directly or indirectly related to the views and recommendations of this research. I have not served as an officer director or employee of company and have not been engaged in market – making activity of the company covered in the research report.
Consult qualified financial advisor before making any investment decision.

 

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