Research Article - Journal of Finance and Marketing (2025) Volume 9, Issue 4

SEBI's regulatory blind spots: Critical analysis of unchecked penny stock manipulation in the Indian market

This research paper provides a comprehensive analysis of the unchecked price manipulation of penny stocks within the Indian stock market i.e., prominent facilitators NSE and BSE, attributing this issue to the regulatory oversight of the Securities and Exchange Board of India (SEBI). Penny stocks, often characterized by low market capitalization and trading at nominal prices, have been prone to price manipulation, leading to detrimental consequences for retail investors and market integrity. The researcher investigates SEBI's role and effectiveness in preventing price manipulation in the penny stock segment and highlights the inadequacies in the existing regulatory framework. It explores case studies of price manipulation schemes involving penny stocks and the impact of these schemes on investors' confidence in the Indian stock market and the research incorporates a comparative analysis between the regulatory approaches of SEC and SEBI, offering valuable insights into differing methodologies and potential areas for improvement. Furthermore, the researcher offers recommendations and potential regulatory reforms to address the identified shortcomings in SEBI's oversight of penny stocks. These suggestions include enhanced surveillance measures, stricter disclosure requirements, and measures to ensure greater transparency and investor protection.

Author(s):

Rithik Dhariwal, Mitali Srivastava*

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