Definition
Pump and Dump
Pump and dump is a manipulation scheme where operators inflate a stock's price with hype, then sell their holdings to unsuspecting buyers, crashing it.
Manipulators accumulate a thinly traded stock cheaply, then 'pump' it through misleading tips, fake news, WhatsApp/Telegram groups, or coordinated buying, drawing in retail investors. Once the price spikes, they 'dump' their shares, leaving latecomers with steep losses.
SEBI's GSM and ASM frameworks specifically target such low-float counters. Warning signs include sudden volume spikes in obscure small-caps, unsolicited stock tips, and prices rising despite poor fundamentals.
Related terms
- SEBISEBI is the Securities and Exchange Board of India, the statutory regulator of the securities markets, protecting investors and overseeing exchanges, intermediaries and listed companies.
- Front RunningFront running is when someone trades ahead of a known large order, exploiting the price impact that order will create.
- Graded Surveillance Measure (GSM)The Graded Surveillance Measure is a SEBI/exchange framework that imposes escalating restrictions on securities with weak fundamentals or abnormal price behaviour, moving them through stages of increasing severity.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.