In a vast majority of cases, those offering such 'SMS tips' services are not registered with the market authorities to carry out such operations and make wrong claims of being authorised entities and also use the names of stock exchanges, including BSE and NSE, for their messages and websites.
To ensure that gullible investors do not fall prey to such ill-intentioned designs, the Securities and Exchange Board of India (Sebi) as also the stock exchanges including BSE and NSE have issued public notices against such scams.
A senior official said regulatory action may be initiated against a number of such entities, while a few of them have already been barred by Sebi from all kinds of dealings in the stock market.
As whereabouts of most such entities are difficult to be ascertained with most of them operating through SMSes and websites the regulator and stock exchanges are focussing
more on spreading investor awareness against such frauds, he added.
In one of its public notices, BSE said "investors are cautioned against SMS tips to buy certain scrips suggesting increase in their market price.
"Do not blindly follow these tips and do thorough analysis about the company before investing," the leading bourse said. In its own public notice, NSE also asked he investors to beware of such tipsters.
"Investors beware. Do not trade on the basis of SMS tips. Take an informed decision before investing," NSE said.
In a detailed investors' guide, BSE also asked investors not to deal with unregistered entities and not to "fall prey to promise of unrealistic high returns".
"Don't get misled by companies showing approval/ registrations from government agencies as the approvals could be for certain other purposes and not for the securities you are buying," BSE said.
The exchange also asked investors not to transact in the stock market on the basis of rumours generally called 'tips'.
Earlier this year, Sebi cracked whip on a scam wherein 'trading tips' were being offered through mobile SMSes and WhatsApp messages by unregistered investment advisors while promising guaranteed returns of as much as 200 percent.
In such cases, Sebi first makes telephone calls to the concerned mobile numbers, followed by further probe and seeking details from mobile operators and banks.
The modus operandi of such entities typically involves sending SMSes to investors with inducing claims and citing references to the website addresses.
They invite prospective investors to enrol with them for their investment advisory services for a registration fee, followed by the investors being provided with trading tips in lieu of commission or profit-sharing.