India’s relationship with speculation is not just historical — it is cultural, economic, even spiritual. Picture 1875: beneath the shade of a banyan tree near Mumbai’s Town Hall, a handful of cotton traders laid the foundation of the Bombay Stock Exchange.
They weren’t merely bartering; they were betting on prices, harvests, and political winds. In Gujarat and Maharashtra, merchants made verbal contracts for future deliveries — wagers based on market whispers, seasonal patterns, and commercial instinct.
From farmers to fund managers: The evolution of speculative intelligence
Speculation is never about recklessness. It is about resourcefulness.
A farmer in Vidarbha studies wind patterns before sowing. A retailer in Varanasi builds inventory ahead of Diwali, banking on festive demand. Even banks speculate — every loan sanctioned is a calculated bet based on creditworthiness and repayment potential.
Speculation is part economics, part psychology, part storytelling. It’s not gambling — it’s judgment. It enables decisions under uncertainty, whether about rainfall, the price of turmeric, or a tech IPO.
But here’s the crucial truth: speculation thrives in moderation. When it crosses into manipulation, it ceases to serve its purpose and begins to distort. What is insightful becomes dangerous. When trades are no longer driven by market views but by the intent to influence prices, speculation becomes subversion.
When speculation turns to manipulation: The SEBI order
SEBI’s message last week was clear: speculative trading is not prohibited, but when the lines blur between speculation and manipulation, a red line is crossed. On July 3, 2025, SEBI — the guardian of Indian capital market integrity — drew that line. In a landmark interim order, it barred a major market participant from trading, alleging manipulative conduct on expiry days and calling for the disgorgement of Rs 4,844 crore — the largest such penalty in Indian capital market history.
SEBI described a calculated pattern:
• Morning Pump: Aggressive buying in Bank Nifty stocks to artificially lift the index.
• Options Play: Simultaneous building of large short positions in index options.
• Afternoon Dump: Strategic sell-off, crashing the index.
• Repeat: The same pattern observed across multiple expiry days.
What began as trading turned into a market-moving strategy — not speculation based on views, but engineering price movements for guaranteed gains. It wasn’t judgment; it was orchestration. Not just clever trading — but a tilted playing field where only one side could win.
The broader regulatory context
This concern isn’t unique to SEBI. In the non-financial world, the Competition Commission of India (CCI) plays a similar role — ensuring no undue market concentration or restrictive practices. Before CCI, the MRTP Act sought to curb monopolistic and manipulative behaviours.
Globally too, regulators have acted decisively. In the U.S., the FTX-Alameda saga saw similar allegations of market manipulation and misuse of customer funds, triggering charges of fraud and conspiracy. U.S. regulators responded firmly — and rightly so. In such cases, Indian laws are aligned with international standards in both spirit and structure.
The case for a level playing field
One additional issue deserves attention — equity of access.
India’s markets must offer a level playing field — whether for a small investor in Mumbai or a tech giant in California. But structural asymmetries exist. Foreign players have access to abundant, cheap leverage, while domestic participants operate under tighter funding constraints. This imbalance needs to be addressed. Leverage will increase the liquidity in the scripts ensuring low risk of manipulation.
Finally, SEBI deserves full credit for its bold and well-reasoned action. The interim order may follow the full judicial path, but the message is unambiguous: market integrity is non-negotiable. Speculation, when rooted in insight and fairness, is the lifeblood of a healthy market. But when it becomes a tool to dominate or deceive, it threatens the very foundation of trust. Regulators must act — and they have.
Let’s ensure that India’s markets remain fair, transparent, and orderly — where every participant plays by the same rules, and the spirit of enterprise is never compromised by the shadow of manipulation.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)