How to Identify Pump-and-Dump Trading in Nepal’s Stock Market
Pump-and-dump schemes are one of the biggest risks for retail investors in NEPSE. This blog explains how manipulators artificially inflate stock prices, how to identify red flags in trading data, and how to protect yourself from falling into the trap.
Introduction: The Dark Side of NEPSE
While NEPSE offers growth opportunities, it also faces manipulation risks. Pump-and-dump schemes—where groups artificially inflate stock prices and then exit—hurt small investors the most.
👉 Learning to spot suspicious trading patterns is key to survival in Nepal’s retail-heavy market.
1. What Is a Pump-and-Dump?
Pump: Price is artificially pushed up through rumors, circular trades, or broker concentration.
Dump: Once retailers buy at inflated prices, manipulators sell and exit, leaving others trapped in lower circuits.
2. How Pump-and-Dump Works in NEPSE
A small-cap stock is targeted.
Rumors (bonus, merger, dividend) spread in groups.
Brokers concentrate trades to create buying illusion.
Price hits multiple upper circuits.
Retail investors rush in late.
Manipulators exit → stock crashes to lower circuits.
3. Red Flags Investors Should Watch
Broker Concentration – One or two brokers handling 40%+ of trades.
Unusual Volume Spikes – Sudden turnover in illiquid stocks.
Repeated Upper Circuits – Without fundamental news.
Circular Trades – Same brokers buying and selling to each other.
Rumor-Driven Buying – Dividend or merger gossip without company filings.
4. Case Studies in Nepal
Microfinance stocks (2021–22): Multiple pump-and-dump patterns seen.
Small hydropower IPOs: Sharp rallies followed by equally sharp collapses.
Insurance rumors: Bonus-heavy expectations inflated prices, later corrected.
5. Impact on Retail Investors
❌ Capital losses from buying at the top.
❌ Funds stuck in lower circuits for weeks.
❌ Emotional stress leading to panic selling.
6. How to Protect Yourself
Check Fundamentals – Don’t buy just on rumors.
Monitor Broker Data – Use Nepalytix tools to track concentration.
Avoid Upper-Circuit Chasing – Enter before momentum, not after.
Diversify – Don’t put all money in speculative small caps.
Be Patient – Quality companies grow steadily, not overnight.
7. Role of Regulators
SEBON & NEPSE must monitor circular trading.
Broker audits to catch manipulation early.
Investor education to reduce retail victims.
Conclusion: Don’t Be the Last Buyer
Pump-and-dump schemes will always exist in speculative markets like NEPSE.
👉 For investors:
Spot the red flags early.
Avoid the herd rush.
Stick with fundamentals.
Final Word: If you can recognize manipulation, you can avoid being the last buyer in a pump-and-dump trap.