Pump and Dump

Remember the dialogue, "Blue Horse Shoe loves Blue Star Airlines" from the movie Wall Street ? If yes, then you already know what I'm hinting at here. For others I would suggest, go watch the movie "Wall Street".  Its worth a watch for all those who are really interested in the world of stock market.
                                     
Well coming back to the topic, "Pump and Dump" is a strategy used by some market participants with vested interests to artificially create a market for a stock by spreading rumors or creating false propaganda about the stock so that the stock can be dumped in the market. The stocks chosen are generally small caps with little volume so that the price can be easily moved. These so called operators take a position in the stock before creating the hype about the stock and later when market is ready for the stock, they dump their holdings making a neat profit. In today's modern world, there are numerous means by which information can be spread to a target audience at the click of a button making it really easy for an operator to create market for a stock.
On second thought, one would think, Are people really so dumb to fall for such a scam? Well, think again. I mentioned in my previous blog about the prevalent "Tip culture" that exists in the Indian markets. Given this scenario, it should not be very difficult to get a handful of people interested in buying the stock of a hollow company.

What made me write about this topic is the flurry of sms spam that I've been receiving lately. Each sms trying to sell me the idea of buying a particular stock. I thought it would be good to educate market participants about this scheme and the risks associated with blindly following the "tip". The least I would say is, go check out the details about the company before buying into its stock.
Let me take an example. I received the following sms about ROTAM COMM. from TM-Primestk on April 5th.
ZROTAM (512359): Buy @ 147.75 target 171/195. Company got order worth 1200cr. 15 day holding.
You can look at the Price Volume chart here for the stock. The chart is pretty much self explanatory. You can see how the volumes increased from near zero level taking the price along with it and now the stock is hitting lower circuit with decreasing volumes. Also, the message talks about a 12cr company getting a order worth 1200cr which is very odd.

I've recieved more such messages and I'm sharing these messages with you guys so that you can analyze the price movement of these stocks.

TM-FASTCALL

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Buy Dividend paying SAHYADRI(532841) CMP 177 TRG 300+ in 1-2 months. EPS of 30. Superb Results awaited. Buy Now before its buying freeze.
-April 19, 16
Buy NRB(530367) CMP 95 TARGET 125+ in 7 days. Buy Now before it goes up
-April 15

Buy Sark Systems(533056) CMP 35 Trgt 50+ in 15-20 days. Huge expansion plan to enter into education segment. Buy now.
-April 15

Sure BTST call. Buy Barak Valley before it hits the upper Circuit CMP 44.50 Trgt 60+ in 3 days and diamond cable CMP 173 TRGT 225 Buy Now Don't miss.
-April 16

Sure shot BTST call: Buy Kisan Moulding(530145) before it hits upper circuit. CMP 94. TRGT 125+ in 7 days. Buy now don't miss.
-April 8, 6

TM-Smtproft

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Buy FIRSTSOURCE sol(532809) CMP 32 Tgt 50 in 2 mnths. UK based equity firm KKR & Co to buy 68% controlling stake by buyout for $250mn. www.smartprofit.in
-April 19, 18

TM-SuperCal

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PROFIT-CALL : Buy KILPEST(532067) @ 18.50. Company bags big order and plans expansion and planning FPO. Target Rs. 28/32/38. Good Financials
-April 19

TM-TOPGAINS

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100% SURE SHOT- Buy 2000/5000 shares CHEVIOT(526817) at CMP with intraday target of 330 or 20% UPPER CIRCUIT and SHORT TERM target 380. Buy very fast
-April 19

Buy WHBRADY(501391) CMP with intraday target 170 or upper circuit BTST target 185 and 1 months target 220.
-April 8

TA-LiveTips

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Buy @opening as much as you can. SUJANA TOWERS @ 58. Reasons : Increase in promoters holding gradually. Upside Price Target of 66-75 www.LiveTips.co.in
-April 19

TA-capstock

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INTRADAY JACKPOT CALL : BUY in Bulk ZORGNCOM(512097) @ CMP . Delivery Target 245 and 330. SL 205. So, Dont miss it. Dont panic. Sure profit.
-April 16

DM-DrmGains

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DREAMGAINS stock futures Intraday calls gave a massive return of 68K in the last week. For free trials on such rocking calls, SMS DG to 56767. DREAMGAINS.com
-April 16

TD4Focus

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Fire..with good results BSE Cash buy BECKONIN(531937) @ 11 Stoploss 8. Short term target 18 and 28. Don't miss the golden opportunity. www.focusinvestment.in
- 15 Apr

TM-BIGBULLS

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INTRADAY SURE SHOT STOCK- SELL 5000/10000 shares ISFT(533181) with intraday target near lower circuit. Sell huge quantity.
-April 5

TM-PrimeStk

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ZROTAM(512359) : Buy @ 147.75 target 171/195. Company got order worth 1200cr. 15 day holding.
-April 5

For people who still think money can be made by acting on the messages sent by some arbitrary guys, I have just one thing to say. "There are no free lunches in this world... my friend".

[I would really appreciate your comments and thoughts on this topic]