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SEBI Turns to AI, NLP, and Big Data to Tackle Market Frauds and Protect Investors

The Indian stock market is not just about numbers and trading screens — it represents people’s savings, dreams, and financial security. However, alongside the opportunity, there is a risk, particularly in the form of fraud, scams, and market manipulation, which hurts small investors the most. Now, the Securities and Exchange Board of India (SEBI) is stepping up its fight against such malpractice by utilising cutting-edge technologies, including Artificial Intelligence (AI), Machine Learning (ML), Natural Language Processing (NLP), and big data analytics.

AI-Powered Surveillance in Action
Recent SEBI investigations highlight how AI and technology are transforming market surveillance. Take the case of Pacheli Industrial Finance and LS Industries, which are also cited by BusinessWorld, two relatively small firms whose share prices shot up abnormally in a classic “pump and dump” scheme. Thanks to SEBI's AI-driven systems, which continuously analyse price patterns, trading volumes and linkages with third-party data, this suspicious activity was quickly flagged. SEBI’s advanced algorithms monitored the trades, cross-verified with bank transactions and off-market deals, and stopped the manipulation before investors suffered heavy losses.
In another incident, Asmita Patel, a self-proclaimed 'finfluencer', misled investors via social media, paid courses, and messaging groups, offering unregistered financial advice. SEBI cracked down, barring her from the market, freezing assets, and issuing recovery orders worth ₹104.6 crore. Here, too, SEBI’s use of NLP tools, pattern recognition algorithms, and big-data analytics helped gather evidence of misleading practices.
Tech-Driven Measures for Investor Protection
SEBI is not stopping at investigation alone. On June 11, 2025, it introduced Validated UPI Handles and the SEBI Check tool to curb payment fraud. This follows alarming reports of nearly 70,000 fake UPI IDs impersonating SEBI-registered entities.
The regulator has also implemented the Cybersecurity and Cyber Resilience Framework (CSCRF) for all market participants. This framework mandates appointing cybersecurity officers, regular audits and stricter risk monitoring to safeguard the securities ecosystem.
India Among Global Leaders in Tech-Led Market Surveillance
Globally, regulators such as the US SEC, UK FCA, and Singapore’s MAS have adopted AI in specific areas, including fraud detection and trade monitoring. But SEBI is going further — embedding technology into its core operations, from fraud detection to risk management and investor education.
Conclusion
SEBI’s tech-led approach is setting a global benchmark for digital security and market integrity. As financial markets become increasingly complex, India’s capital market regulator is leading the way in ensuring that innovation goes hand in hand with robust investor protection, making Indian markets safer and more trustworthy for all.
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