Shevgaon: Realty shrinks, stokes suicides, as illegal PMSes reign this quiet Maharashtra tehsil

People are taking loans on gold and houses to invest with these illegal PMSes.

Shevgaon, in central Maharashtra's Ahmednagar district, has largely had a quiet history. The tehsil, once known for sugarcane cultivation and cotton trading, made headlines in the 1970s when it was flooded after the Jayakwadi Dam overflowed and then, more recently, in 2023, when there was a rare communal altercation.

Today, Shevgaon faces a whole new challenge, of sub-brokers running illegal portfolio management services (PMS) and promising people the sky.

The shift is drawing money away from safer investments such as bank deposits and traditional investments such as real estate.

Hitesh Oberoi, who deals in Ahmednagar (city) and Shevgaon, told Moneycontrol, "Most people I know have withdrawn their fixed deposits and are dabbling in the equity markets for better returns."

While cooperative banks are struggling to find depositors, these illegal establishments are expanding at a rapid pace. A bank officer, speaking on condition of anonymity, told Moneycontrol, “For 12 months now, money that used to come to the share market is being diverted to these people who promise much higher returns.”

More worryingly, people are taking loans on gold and houses to invest with these illegal PMSs, and the worst of it is that these arrangements are leading to punishing financial losses, thuggery and suicides.

Who runs these illegal establishments?

Sai Kawade, a 25-year-old, is one of the dream sellers. He boldly advertises his venture, Asitech Portfolio Management Services, and promises 7 percent monthly returns, which translates to 84 percent annual returns. Asitech is not a registered PMS and is therefore an illegal service.

For comparison, the best of the legal, registered PMSs in India delivered 50 percent returns in the past year. With such an enormous difference in returns promised, people flock to unregistered entities, often not knowing that these are illegal establishments.

Moneycontrol has reached out to Kawade and this article will be updated when he responds.

Kawade's Instagram page claims that he is a sub-broker of Angel One, while his Facebook page says that he is an Authorised Person at Zerodha. Angel One and Zerodha told Moneycontrol that Kawade is not associated with their brokerages, and is neither a sub-broker nor an Authorised Person as claimed.

Like others offering PMS services in Shevgaon, Kawade does not transfer the client's securities into his own account. Instead, he claims that he will trade them through the client's account, and asks clients to give him their login details, starting with the username and password.

Kawade's posts show that he encourages his clients to open an account with Zerodha, claiming that with this brokerage's account, he can skip the two-factor authentication.

Brokerages are expected to enable a two-factor authentication (2FA)—a PIN/password and a one-time password—before allowing a client access to a demat or trading account. Kawade claims to have a software that bypasses this for a Zerodha account.

Zerodha told Moneycontrol that this is a false claim and that it is not possible to bypass 2FA on its platform.

Fake fortune

Kawade employs the usual methods to advertise his strategy of selling puts and calls by posting extensively about them on social media with his trading account's profit and loss (P&L) statements.

Moneycontrol has reported extensively on how these P&L statements can be forged using simple apps available for free. The statements can be made to look like they are generated by leading brokerage platforms, and therefore can be used to convince investors fairly easily.

Usually, illegal PMSs do not deliver on their promises. Such PMS managers deliver promised returns for a few months with another's client's capital, and then vanish with the larger part of the client's capital.

In Shevgaon, this leg of the story has taken a more sinister turn. People have been employing goons to get their capital back from these sub-broker PMS managers.

News reports state that the PMS managers, unable to return their clients' money and fearing retribution, are committing suicide.

Desperate measures

According to a report by Pudhari, a regional language newspaper in Maharashtra, a sub-broker in Shevgaon consumed poison after investors demanded the promised return and their invested capital. It was reported that at least three people who ran this operation embezzled crores of rupees.

Many investors are resorting to such desperate measures because they have invested leveraged capital, say market insiders.

The market regulator has passed orders against illegal PMSs. Investors can raise their concerns against registered entities, such as the brokerages that have employed these sub-brokers, on the Sebi Complaints Redress System (SCORES). They can also complain against unregistered, illegal PMSs by writing to the relevant Sebi department by registered post or email.

Investors can attach screenshots of their communications with such entities, including screenshots of WhatsApp conversations and call recordings, along with their complaint to the regulator.

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