Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Last September, Sarah Swata, a thirty nine year old doctor
Speaker 2: from India, was scrolling on his phone when a Facebook
Speaker 2: ad caught his attention.
Speaker 1: He saw an ad that was from Geojith Financial Services,
Speaker 1: or at least it claimed to be from Jeojith, which
Speaker 1: is a prominent brokerage in India. It's well reputed and
Speaker 1: they were offering him some special books and the returns
Speaker 1: were really high.
Speaker 2: Alex Gabriel Simon is a Bloomberg Stocks reporter based in Mumbai.
Speaker 2: He spoke to Sarah Swatam who asked that we just
Speaker 2: use his first name because his case is under police investigation.
Speaker 2: On that September day, Sarah Swata clicked on the ad
Speaker 2: and was invited to join an exclusive WhatsApp group.
Speaker 1: So, once he joined the WhatsApp group, there were seemingly
Speaker 1: employees of Giojeth giving him all sorts of advice and
Speaker 1: then he was asked generally what any regular brokerage would
Speaker 1: ask you, and they had a proper application process and
Speaker 1: he signed up with the app and the apps had
Speaker 1: the name of Jyojith. It had SEBI registration number. SEBBI
Speaker 1: is the capital market regulator in India. There was no
Speaker 1: sense of this being fake anywhere at all.
Speaker 2: The so called advisors told Saraswata he could make easy
Speaker 2: money just by pressing a few buttons on their trading
Speaker 2: app every day, that they had a surefire buy and
Speaker 2: flip strategy. So Sarah Swata started sending small amounts of money,
Speaker 2: and soon the money he put in started multiplying on
Speaker 2: the app. Three hundred and seventy thousand US dollars became
Speaker 2: half a million, then a million, then two million dollars,
Speaker 2: all in the span of a few months.
Speaker 1: He felt like he hit a gold mine, is exactly
Speaker 1: what he told me, and the money was growing to
Speaker 1: an extent where you wouldn't expect in a regular stock
Speaker 1: market scenario.
Speaker 2: By December, he thought it was about time to cash
Speaker 2: in on his earnings, but when he asked to withdraw
Speaker 2: part of the money, things took a different turn.
Speaker 1: They told him that since you have gained of more
Speaker 1: than one hundred percent on your investments, that he'll need
Speaker 1: an extra commission to withdraw that money. So he was
Speaker 1: asked to invest much more. He ended up pawning off
Speaker 1: his wife's gold jewelry to cover this amount, and by
Speaker 1: then he had already invested much of what he had
Speaker 1: had multiple personal loans as well as gold loans.
Speaker 2: The firm kept coming back with excuses to ask for
Speaker 2: even more money. That's when Sarah Swata realized something wasn't right.
Speaker 1: So he took an actual flight to the real brokerage,
Speaker 1: that is Joji, to their headquarters. He went there and
Speaker 1: talked to the employees about his investments and they immediately
Speaker 1: found out that he was being scammed. They looked at
Speaker 1: the records and there was no account under his name.
Speaker 2: It was all a scam. The app was fake and
Speaker 2: the total amount he invested seven hundred thousand dollars, his
Speaker 2: entire life savings and more, it was all gone. And
Speaker 2: there are many retail investors likes Ariswata who hope to
Speaker 2: make a fortune after watching India's booming stock market produce
Speaker 2: some genuine millionaires, but instead they're tricked out of millions
Speaker 2: in life savings by scammers. Last year, some one hundred
Speaker 2: and fifty thousand people reported being victims of stock frauds,
Speaker 2: and all time high in India. This is a concern
Speaker 2: not only for retail investors in India, but for the
Speaker 2: Indian economy.
Speaker 1: More broadly, so when foreign investors see the retail friends,
Speaker 1: he has reached levels that people are willing to now
Speaker 1: put money into these scams. They are thinking this frenzy
Speaker 1: has gone too far. Maybe this is not a market
Speaker 1: that we should be in, and they've been selling in billions.
Speaker 2: Welcome to The Big Take Asia from Bloomberg News. I'm Wanha.
Speaker 2: Every week we take you inside some of the world's
Speaker 2: biggest and most powerful economies and the markets, tycoons and
Speaker 2: businesses that drive this ever shifting region. Today on the show,
Speaker 2: the Dark Side of India's retail investing frenzy. What's driving
Speaker 2: the surge and financial cyber scamps, and what does it
Speaker 2: mean for the future of India's boomings stock market. Up
Speaker 2: until last September, India stock market was on a tear.
Speaker 2: The benchmark nifty to fifty index posted gains for nine
Speaker 2: years in a row. Its growth overtook major markets across
Speaker 2: the world. It even outperformed the S and P five
Speaker 2: hundred for most of last year, and.
Speaker 1: The rally has really picked up pace in the last
Speaker 1: five years. After COVID there was the monetary policy stimulus.
Speaker 1: Growth was really going about trend and all of this
Speaker 1: had led to a lot of gains in the market,
Speaker 1: especially in small and midcaps, where retailers were really pouring
Speaker 1: their money into.
Speaker 2: Shares of companies that went public last year surged by
Speaker 2: an average of more than thirty percent in the first
Speaker 2: month after their IPO. That's more than almost twenty four
Speaker 2: percent globally, and the country's unprecedented market rally drove tens
Speaker 2: of millions of Indians to stocks to grow their wealth.
Speaker 1: If you go into social media, there are so many
Speaker 1: stories of people who became millionaires from investing in the market.
Speaker 1: Retail investors have started to believe that this is easy
Speaker 1: and that the Indian market would keep rising every year
Speaker 1: like it did in the last nine years.
Speaker 2: Today there are more than one hundred and thirty million
Speaker 2: unique trading accounts, that's almost triple the number five years ago.
Speaker 2: Retail Investors directly and through mutual funds currently own about
Speaker 2: eighteen percent of the inn market, a record high, and
Speaker 2: Alex says there were several factors that all came together
Speaker 2: to drive this retail boom.
Speaker 1: There was a flood of cheap Chinese phones that have
Speaker 1: come into the market, and along with that, billionaire Mocation
Speaker 1: Bani launched Giovich's his telecom company, and that launch was
Speaker 1: with free voice calls as well as dirt sheep data,
Speaker 1: and that really gave access to Internet to a lot
Speaker 1: of people in India, going deep into the hinterlands.
Speaker 2: On top of this, discount, brokerages popped up to offer
Speaker 2: zero fees, similar to robin Hood or Interactive brokers in
Speaker 2: the US. That made it easy and affordable for a
Speaker 2: lot of Indians to just open an account and start trading.
Speaker 2: And it's not just Indians who've been jumping into the
Speaker 2: capital markets. As one of the fastest growing economies in
Speaker 2: the world, India has drawn the attention of top business leaders,
Speaker 2: from Apple's Tim Cook and Tesla's Elon Musk to veteran
Speaker 2: emerging markets money manager Mark Mobius. Last year, Mobias suggested
Speaker 2: global funds should allocate at least fifty percent to Indian stocks.
Speaker 1: The pick for me is India.
Speaker 2: India is the place. Even though India's come back a
Speaker 2: lot and it has even at some point outperformed the
Speaker 2: US market, India's still got a long way to go.
Speaker 2: It's a message India's Prime Minister Noarendra Modi has been
Speaker 2: peggybacking on Mobius does a park explore. Mody touted the
Speaker 2: fund manager's call in a speech last October and suggested
Speaker 2: that other global funds should invest heavily in Indian stocks
Speaker 2: to capitalize on the country's market strength. But despite this
Speaker 2: excitement and optimism for India's stock market, a darker side
Speaker 2: to the retail investor frenzy has emerged. All this investment
Speaker 2: activity by ordinary Indians has caught the eye of cyber
Speaker 2: criminals and fronsters over the past several years. Now India
Speaker 2: is being targeted by modern trading scammers at alarmingly high rates.
Speaker 1: Cybersecurity firm Cloudseek came out with a report that said
Speaker 1: India is one among the top five countries which are
Speaker 1: being targeted by cyber criminals in very sophisticated scams. A
Speaker 1: lot of countries went through a gradual change where they
Speaker 1: started with computers and then moved to laptops and mobile phones,
Speaker 1: but in India it's all quick and people are not
Speaker 1: really digitally literate, and all of that has made India
Speaker 1: very vulnerable when it comes to cybercrime.
Speaker 2: Government data shows that last year there were more than
Speaker 2: four hundred stock market linked scams reported every day, amounting
Speaker 2: to more than one billion dollars lost. So far, less
Speaker 2: than ten percent of that money has been recovered. Ali
Speaker 2: says that's likely only the tip of the iceberg.
Speaker 1: So the people getting scammed are unlike what you would suspect.
Speaker 1: It's not just maybe the old people or uneducated people
Speaker 1: when I'm talking to brokerages whose apps have been coned
Speaker 1: or other victims. It's coming from all walks of life.
Speaker 1: There are people who are educated, people who are uneducated,
Speaker 1: coming from Tier one cities, tier two cities, as well
Speaker 1: as deep into the villages in India where earlier there
Speaker 1: was barely access to internet. But now they're being scammed
Speaker 1: and lured into stock market link scams.
Speaker 2: And recently the market's taken a turn, raising concerns that
Speaker 2: these stock linked scams may have played a part in
Speaker 2: denting consumer confidence. Well, stocks in India have wrapped out
Speaker 2: there over a trillion dollars from their market bellue and
Speaker 2: global fund managers are also not in any rush after
Speaker 2: the break the Risks investment scams posed to India stock market.
Speaker 2: And what does the recent shares plument mean for Mody's
Speaker 2: ambition to sell India stocks to foreign investors. After an
Speaker 2: unprecedented nine year rally, India's benchmark stock index has experienced
Speaker 2: a recent downturn. It saw up to a sixteen percent
Speaker 2: decline from September last year to early March. Some popular
Speaker 2: stocks have fallen as much as fifty percent from their peak.
Speaker 2: Bloomberg reporter Alex Gabriel Simon says that was partly driven
Speaker 2: by worries about slowing economic growth and as terarif risks
Speaker 2: royal global markets, but he also says the surge in
Speaker 2: financial cyber scams have played a role in the recent decline.
Speaker 1: What these scams do is make people who have been
Speaker 1: scammed wary of investing in general, even when they are
Speaker 1: now putting money into legitimate trading apps, and that sentiment,
Speaker 1: if it prolongs, might lead to a break in the
Speaker 1: broadening investor base we have seen in India.
Speaker 2: Right of these scams has put pressure on Runder Modi's
Speaker 2: government to do more to protect investors.
Speaker 1: You could clearly see that they're trying to do something
Speaker 1: to stop this, and you can see that they've been
Speaker 1: increasing outreach to fix this issue in certain parts of
Speaker 1: the country. When you call someone, the caller tune on
Speaker 1: the other side is a warning that there has been
Speaker 1: cyber scams going on. Do not share OTPs with anyone,
Speaker 1: do not make these instant payments to people who are
Speaker 1: not registered entities.
Speaker 2: And at the same time, the Indian government has been
Speaker 2: trying to tackle another growing issue, the rise of financial
Speaker 2: influencers on social media, or so called influencers. And while
Speaker 2: influencers aren't necessarily fraudulent, they often lack professional training and
Speaker 2: some don't disclose sponsorships or financial ties, and that's a
Speaker 2: concern India's regulators are trying to address.
Speaker 1: So SABEE has come out with numerous rules to contain
Speaker 1: the rise of influen conswers in India. They have made
Speaker 1: it illegal for them to have affiliate links to entities
Speaker 1: managed by the regulator. They've also banned people from selling
Speaker 1: stock tips in particular, and SABIE has also, according to
Speaker 1: our reporting, stepped up their surveillance of social media platforms.
Speaker 2: Alex says the government's measures to date have had some impact.
Speaker 2: The number of fraud complaints are slowing, but there's far
Speaker 2: more to be done.
Speaker 1: So consumer confidence is everything for an economy, and people
Speaker 1: losing money is never good, even when you're looking at
Speaker 1: demand for products or just confidence to invest. India is
Speaker 1: at a stage where it's trying to widen or broaden
Speaker 1: its investor base and that has now started to increase
Speaker 1: and it is coming at a time. These camps are
Speaker 1: coming at a time when India is going through that
Speaker 1: journey of transformation, of financialization of savings, and this can
Speaker 1: be a road break to that if not contained on time,
Speaker 1: If people are now worried to invest in the market,
Speaker 1: then the strength of the domestic investors could come into question,
Speaker 1: and that is a big risk for the Indian equity market.
Speaker 2: And alex What about foreign investors? Would they come back?
Speaker 1: Foreign investors are always affected by the news flows coming
Speaker 1: from a country. The sentiment is a factor beyond valuations
Speaker 1: or earnings. So when foreign investors see the retail frends,
Speaker 1: he has reached levels that people are willing to now
Speaker 1: put money into these scams. They are thinking this frenzy
Speaker 1: has gone too far. Maybe this is not a market
Speaker 1: that we should be in, and they've been selling in billions.
Speaker 1: Modi's large plan is to build India into Vixit Barret
Speaker 1: which means developed India, and that is his vision for
Speaker 1: twenty forty seven when India attains one hundred years of independence.
Speaker 1: But that requires more digital literacy, that requires people to
Speaker 1: build wealth, that requires people to move into more sophisticated
Speaker 1: investment plants, and these scams proliferating does not sit well
Speaker 1: with these plans.
Speaker 2: As for Sarah Swantam, Alex says after reporting the case
Speaker 2: to the police, he still has no idea who was
Speaker 2: behind the scam, and he's still trying to figure out
Speaker 2: if he can get his money back.
Speaker 1: He's really traumatized about this whole incident and was even
Speaker 1: finding it hard to talk about it. He told me,
Speaker 1: this is an incident the memory of which he's trying
Speaker 1: to wipe off from his brain.
Speaker 2: This is the Big take Asia from Bloomberg News. I'm wanh.
Speaker 2: This episode was produced by Naomi and Young Young. It
Speaker 2: was edited by Grace Jennings ed Quist and Catherine nine.
Speaker 2: It was fact checked by Young and Naomi and mixed
Speaker 2: and sound designed by Taka Yasuzawa. Our senior producer is
Speaker 2: Naomi Shaven. Our senior editor is Elizabeth Ponso. Our deputy
Speaker 2: executive producer is Julia Weaver. Our executive producer is Nicole Beemster.
Speaker 2: Sage Bauman is Bloomberg's head of podcasts. If you liked
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