As of September 23, 2025, the total number of investor accounts registered with the NSE stood at 23.5 crore. The mutual fund boom has added further depth: 5.4 crore investors now participate through systematic investment plans, with a doubling of small-ticket SIPs under ₹500, many from tier-III towns. The democratization of market access is real and visible. Investors are no longer tethered to conventional intermediaries. They make decisions on their phones, consume information from fintech platforms and social media, and treat equities as a legitimate pathway to wealth creation.
This democratization has turned the stock market into an engine of capital formation, funding India’s highways, ports, power plants, digital infrastructure, and, increasingly, its innovation economy. Yet, the very openness that allows new investors to enter has also exposed them to vulnerabilities that were almost unimaginable in earlier decades. Attacks on trust and confidence have grown sharper. Deep fakes circulate on social media. Frivolous handles pump out rumors with uncanny timing. Foreign short sellers, sitting thousands of miles away and unaccountable to Indian regulators, release market-moving reports that are amplified by television debates, international media, and even courtrooms. Retail investors, especially first-timers, often react to headlines before full facts emerge, rushing to sell and eroding value.
The threat is not abstract. Incidents of the past three years reflect a trend where foreign entities have tried to disrupt the Indian markets but courts and regulators have stepped in or refused to entertain frivolous allegations to protect domestic investors.
In July 2025 when Viceroy Research, a lesser-known outfit, published a series of allegations against mining and natural resources company Vedanta Group just as the company was entering a decisive stage in its long-planned demerger. Viceroy pieced together publicly available data and speculative interpretations, yet the impact was enough to rattle share prices and trigger another PIL seeking probes by SEBI, the RBI, and the corporate affairs ministry. On October 10, the Supreme Court of India refused to entertain the PIL. As per reports, Solicitor General Tushar Mehta argued in the court that these institutions (shortsellers) have absolutely “no credibility”. He also pointed to a systematic pattern where outside agencies create reports and try to influence the Indian stock markets, adding that the PIL must be dismissed to send a strong message that the highest court of the land could not be taken for a joyride. He also pointed to the modus operandi of foreign short-sellers where such firms seek to destabilise Indian companies and markets by releasing reports and then amplifying their effect through litigation.
Earlier, in January 2023, Hindenburg Research, a US-based short seller, had released a report against the Adani Group just days before its ₹20,000 crore follow-on public offer. The timing was devastating. Adani stocks plunged, public discourse exploded, and a spate of PILs followed. When the Supreme Court-appointed committee and SEBI finally investigated, they found no significant wrongdoing. What stood out instead was Hindenburg’s admission that it had taken short positions in Adani stocks before publishing the report. In September 2025, SEBI dismissed multiple allegations against the Adani Group which it was investigating after the Hindenburg Report. The regulator noted that after considering the matter holistically, it found that the allegations made against certain Adani Group entities were not established.The outcome in both these cases reflect consistent measures taken by the regulators and the courts to safeguard Indian companies from motivated foreign shortsellers. The response to such challenges cannot be conventional. Transparency must be preserved, but manipulation must be deterred. That requires nimbleness and innovation from every institution involved in market governance. SEBI has begun tightening disclosure rules for analysts and finfluencers, stepping up real-time surveillance to detect unusual trading activity, and showing a willingness to act against offenders. The exchanges, too, have invested in technology that flags anomalies within seconds. Depositories have launched large-scale investor awareness campaigns. NSE alone conducted more than 14,600 such programs in FY25, four times the number in FY20, engaging close to eight lakh participants.
The legal system, too, must adapt. PILs are an important democratic safeguard, but when tied to market-sensitive matters, they need stronger filters. Preliminary admissibility tests based on locus standi and substantive evidence could reduce the scope for frivolous petitions while preserving the right to genuine recourse. Otherwise, speculative claims filed in courtrooms risk becoming another weapon in the arsenal of those looking to disrupt markets.
What emerges is a market that is simultaneously in adolescence and in ascent. The scale of retail participation—over 20 crore demat accounts, millions of SIP investors, trading activity spreading to small towns—signals a new era in India’s financial history. But adolescence also brings volatility and vulnerability. Investors now get their cues from multiple digital sources, not all of which are reliable. The regulators, exchanges, depositories, and even courts cannot afford to be reactive. They must be nimble-footed, unconventional, and alert to new forms of manipulation.
If India can strike this balance, the rewards will be immense. A deeper, broader, more resilient stock market will continue to funnel domestic savings into productive assets, reduce dependence on volatile foreign inflows, and strengthen the economy’s core. But if investor confidence is undermined by the unchecked spread of misinformation, the same openness that powers growth could also erode it. The real test, then, is not whether India’s stock markets can grow—they clearly are—but whether they can evolve the resilience needed to thrive in an era where information, and its distortion, moves faster than ever before.
(The author is Former SBI Chairman)
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