In a post on X on October 20, Kamath cautioned that such schemes could become more frequent as the market cycle progresses. He also flagged the growing influence of social media personalities promoting stocks and IPOs, warning that investors chasing seemingly easy money could face significant losses.
Kamath's warning centres on the persistence of stock market scams despite the widespread availability of financial information and digital tools. He said investors continue to fall for tips shared through messaging platforms and social media, often without checking the credibility of the person making the recommendation or understanding the risks involved.
In a typical pump-and-dump scheme, promoters attempt to create artificial excitement around a stock to attract buyers and push up its price. Those behind the promotion may then sell their holdings at inflated prices, leaving investors who entered later exposed to sharp losses. The ED action mentioned by Kamath concerns an alleged scheme; the allegations should not be treated as proven wrongdoing.
His warning also draws attention to the risks of recommendations that exploit investor enthusiasm around popular stocks, upcoming IPOs or claims of inside knowledge. Investors may be particularly vulnerable when messages create urgency or suggest that an opportunity will disappear unless they act immediately.
Kamath suggested that investors use AI tools such as ChatGPT and Claude to question suspicious investment messages before committing money. Such tools can help identify warning signs, explain unfamiliar financial terms and suggest questions to investigate, although their responses should not replace independent verification.