The Bombay Stock Exchange has warned investors to be careful before investing in the stock markets.

In a cautionary note, the BSE has said that with the stock indices touching new highs on the back of surging volumes, more investors are investing in the stock markets than ever before, making it imperative for them to be aware of the traps and dangers of investing in the stocks.

• Sensex crashes by 266 points at 8222

The Investor Protection Fund of the Bombay Stock Exchange Ltd has laid out certain Do's and Don'ts for investors to alert them to the attendant risks associated with trading in stocks.

Do's

• Always deal with the market intermediaries registered with the Securities and Exchange Board of India (Sebi) / stock exchanges.
• Give clear and unambiguous instructions to your broker / agent / depository participant.
• Always insist on contract notes from your broker. In case of doubt of the transactions, verify the genuineness of the same on the exchange Web site (http://www.bseindia.com).
• Always settle the dues through the normal banking channels with the market intermediaries.
• Before placing an order with the market intermediaries please check about the credentials of the companies, its management, its fundamentals and recent announcements made by them and various other disclosures made under various regulations. The sources of information are the websites of exchanges and companies, databases of data vendor, business magazines, et cetera.
• Adopt trading / investment strategies commensurate with your risk-bearing capacity as all investments carry risk, the degree of which varies according to the investment strategy adopted.
• Please carry out due diligence before registering as client with any Intermediary. Further, investors are requested to carefully read and understand the contents stated in the Risk Disclosure Document, which forms part of investor registration requirement for dealing through brokers in the stock market.
• Be cautious about stocks, which show a sudden spurt in price or trading activity, especially low price stocks.
• Please be informed that there are no guaranteed returns on investment in stock markets.

Don'ts

• Don't deal with unregistered brokers / sub-brokers, intermediaries.
• Don't deal based on rumours generally called 'tips'.
• Don't fall prey to promises of guaranteed returns.
• Don't get misled by companies showing approvals / registrations from Government agencies as the approvals could be for certain other purposes and not for the securities you are buying.
• Don't leave the custody of your demat transaction slip book in the hands of any intermediary.
• Don't get carried away with onslaught of advertisements about the financial performance of companies in print and electronic media.
• Don't blindly follow media reports on corporate developments, as they could be misleading.
• Don't blindly imitate investment decisions of others who may have profited from their investment decisions.
• For the benefit of investors, the exchange has installed a Toll Free line 1600 22 6663, wherein they can inform on any specific lead with regard to any type of undesirable trading practices in any scrip or any type of market aberration observed by them. Investors are hereby requested to get their messages recorded in English or Hindi. Identity of the investor will be kept confidential.