On June 27, the Securities and Exchange Board of India disclosed that it had uncovered incriminating evidence in a series of coordinated raids targeting entities allegedly involved in pump-and-dump operations across several penny stocks. The investigations span multiple cities and involve agro-tech firms, shell companies, and trading outfits that together moved several thousand crore rupees in suspected manipulation. It is a phenomenal start—better late than never.
SEBI has framed this action as part of its ongoing effort to cleanse the markets. It is a necessary step, but it is not yet a sufficient one.
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Retail mania and fundamentals
The surge in Indian equities has been extraordinary, driven in large part by an enthusiastic wave of retail investors who entered the market during the pandemic years and stayed. Their appetite has been turbocharged by low barriers to access, a proliferation of digital platforms, and a cultural moment that celebrates trading. Some of the narratives equate equity market run to nationalist pride, a poor alternate to financial literacy.
Small-cap and micro-cap stocks have rallied dramatically, often unmoored from fundamentals. What SEBI has now exposed is that behind some of these rallies lies a deeper infrastructure of price rigging, coordinated volume creation, and social-media-fuelled hype.
When betting on stocks seems a national investing pastime, life is markets regulator is always tough.
Velocity without guardrails
The issue at hand reflects the growing complexity and fragility of an ecosystem where information moves faster than regulation can keep up. WhatsApp groups, Telegram channels, YouTube stock tips, and finfluencer endorsements have created a volatile blend of velocity and vulnerability.
SEBI has acknowledged this new architecture and is seeking expanded powers to examine instant messaging trails and digital communication histories as part of its investigative framework. Finally. It is a move in the right direction.
Enforcement gaps and institutional weaknesses
But surveillance alone will not be enough. Enforcement must follow. Many of the tools SEBI possesses—algorithmic monitoring, suspicious trade alerting systems, audit trails—remain underutilised or inconsistently deployed or even not up to date. While the regulator has improved significantly over the years in terms of data sophistication and real-time market oversight, there is a sense among market participants that it has held back from using its full authority, due to lack of wider bench strength needed.
The reasons are not entirely obscure. Some point to political sensitivities. Others suggest institutional reluctance to disturb the retail momentum that powers India’s bullish narrative. There is also the challenge of separating manipulation from exuberance, which in thinly traded penny stocks often appear indistinguishable.
SEBI’s capacity conundrum
SEBI’s long-term credibility will also depend on whether it has the institutional muscle to follow through. Where is the supervisory capacity to run deeper, faster, more widespread investigations across a growing pool of suspicious trades? Where is the legal firepower to ensure that its orders and enforcement actions survive judicial scrutiny rather than being routinely overturned by the Securities Appellate Tribunal? SEBI’s track record on this front has not inspired confidence.
Far too often, its investigations fade quietly or collapse on procedural grounds. It is a game of regulatory whack-a-mole where the manipulators adapt faster than the institution can keep pace.
Influence industry’s blind spot
One domain that has largely escaped scrutiny is the nexus between financial media commentary and trading behaviour. Television panels, online streaming platforms, and real-time market shows continuously feature experts, strategists, and stock pickers who speak authoritatively on specific scrips during live market hours.
While many of them may be credible professionals, the question remains—are all of them clean? Are there undisclosed positions, conflicts of interest, or patterns of front-running that never surface? In a market where perception moves prices faster than earnings reports, influence is capital. When analysts become celebrities and stock commentary becomes performance, the lines between insight and intent begin to blur. This is a grey zone SEBI has been hesitant to enter, but one it can no longer afford to ignore.
A new kind of market player
What is clear is that these operations—once confined to fringe players—have become more organised, better resourced, and digitally native. They involve actors who are agile, evasive, and often protected by layers of intermediaries. But it raises a larger question about the capacity of market infrastructure to adapt to the behavioural and technological shifts in retail trading.
When a stock is being promoted through influencer videos, circulated across thousands of accounts in seconds, and bought on trading apps with borrowed money, the old frameworks for detection and deterrence begin to fray.
Avoiding episodic justice
The real risk now is that unless SEBI pushes further, these enforcement actions will be read as episodic rather than systemic. The integrity of the market depends not only on the perception of fairness but also on the visibility of consequences. For every manipulated surge that goes unpunished, trust erodes quietly. For every large operator who escapes scrutiny because they are networked or shielded, the signal sent to the broader market is that regulation has limits.
This is not to suggest that India should clamp down indiscriminately on all retail activity. The broadening of participation in capital markets is one of the great democratising trends of the past decade. But participation cannot come at the cost of probity. The bull run cannot be sustained on the back of misinformed capital chasing orchestrated bubbles.
There is now a good window for SEBI to move from reactive enforcement to proactive governance. That will require sharper data tools, inter-agency cooperation, judicial clarity on digital privacy and evidence thresholds, and an explicit mandate to go where the political economy of trading may be uncomfortable to touch.
The penny-stock crackdown is a start. SEBI must now walk through it with greater conviction, greater transparency, and above all, the courage to confront where the incentives are misaligned.
Srinath Sridharan is a strategic counsel with 25 years experience with leading corporates across diverse sectors including automobiles, e-commerce, advertising and financial services. He understands and ideates on intersection of finance, digital, contextual-finance, consumer, mobility, Urban transformation, and ESG. Actively engaged across growth policy conversations and public policy issues.