MUMBAI: As India’s capital markets swell with new investors and record fund-raising, the country’s market regulator is turning to artificial intelligence as a frontline defence—seeking to curb fraud, restore trust in advice, and quietly modernise how oversight itself works.
A Regulator Confronts the Scale of Participation
When Tuhin Kanta Pandey, chairman of the Securities and Exchange Board of India (SEBI), addressed market participants in Chennai this week, the numbers he cited framed both opportunity and risk. India’s capital markets have expanded sharply across equities, derivatives, mutual funds, real estate investment trusts, infrastructure investment trusts and corporate bonds. The number of unique investors has risen from about 4.3 crore in fiscal 2020 to 13.7 crore today, a more than threefold increase in just a few years.
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That surge has been matched by a flood of capital raising. In the first nine months of the current financial year, companies raised roughly ₹1.7 lakh crore through 311 initial public offerings. Total equity mobilisation has already crossed ₹3.8 lakh crore. For the regulator, the breadth of participation and velocity of transactions have created a new supervisory challenge: how to protect a vastly expanded investor base without slowing the markets that have drawn them in.
Artificial Intelligence as a First Line of Defence
Central to that effort is the use of internally developed artificial intelligence tools. SEBI, Pandey said, is already deploying such systems to protect investors and ensure market integrity. One of them, known as the SEBI Sudarshan system, is being used to identify fraudsters on social media who pose as registered investment advisers in order to mislead retail investors.
The focus on social media reflects a shift in how market-related frauds operate. As more first-time investors rely on online platforms for tips and recommendations, impersonation and unregistered advisory activity have become easier to scale. SEBI’s tools are designed to flag such behaviour early, allowing the regulator to act before losses spread.
Pandey also pointed to the role of basic verification mechanisms—validated UPI handles and the regulator’s own “SEBI Check” facility—as practical safeguards. These, he said, form the first line of defence against cyber fraud, particularly for investors navigating digital payments and online interactions with intermediaries.
From Advice to Audits: Expanding the Use of AI
Beyond policing impostors, SEBI is extending artificial intelligence into its own supervisory processes. Pandey said the regulator is developing an AI-based system to analyse cyber audit reports submitted by market entities and identify gaps. Such reports are often dense and technical, and automation, officials believe, can help surface risks that might otherwise be missed.
The emphasis on credible information runs through this approach. A recent SEBI investor survey, Pandey noted, underscored the demand for clearer, more reliable sources of guidance. In response, the regulator plans to continue expanding investor awareness and outreach campaigns using a multilingual, multimedia and multi-agency strategy.
Verified Performance and a Changing Market Landscape
That redirection is expected to be reinforced by the Past Risk and Return Verification Agency, or PARRVA, which Pandey said would provide investors with verified performance data. By making such information more accessible, SEBI hopes to nudge market participants toward credible advisers and products, and away from claims that cannot be substantiated.
