“Dabba Trading”, a term that might seem unfamiliar to many, is a form of trading that has been prevalent in India for quite some time. Despite its widespread practice, it’s important to note that Dabba trading is illegal and falls under the violation of the securities laws in India. 

This blog aims to shed light on the concept of Dabba trading, its implications, and why it’s considered illegal.

What is Dabba Trading?

Dabba trading, also known as “box trading”, is an unauthorized form of trading that takes place outside the recognized stock exchanges. 

It is akin to gambling, where bets are placed on the price movements of stocks. 

If the share price goes up, the person who placed the bet earns the difference, and conversely, they lose if the price falls.

How did Dabba Trading Originate?

In the early days of stock trading in India, transactions were conducted in person.

Brokers would carry securities (in the form of paper certificates) in wooden boxes, known as ‘Dabbas’, to transport them between different parties.

These brokers, known as ‘Dabbawallas’, would connect buyers and sellers, executing trades on their behalf.

As technology advanced, the physical ‘dabbas’ were replaced with digital platforms.

However, the term ‘Dabba Trading’ stuck, continuing to represent this form of off-exchange trading.

Why is Dabba Trading Illegal?

Dabba trading is considered illegal because it violates the securities laws and falls under Sections 406, 420, and 120-B of the Indian Penal Code, 1870. 

It is an unregulated form of trading where transactions are not recorded, leading to a lack of transparency and potential manipulation of the market. 

Moreover, it leads to a loss of revenue for the government as these transactions are not taxed.

The Impact of Dabba Trading

Dabba trading has significant implications for both the traders involved and the overall market. 

For traders, the risk is high as there is no regulatory oversight, and they could potentially lose their entire investment. 

For the market, Dabba trading can lead to price distortions and volatility, undermining the integrity of the financial system.

The Role of Technology in Dabba Trading

With the advent of technology, Dabba trading has evolved and become more sophisticated. Mobile applications are now being used to run these betting rackets, making it even more challenging for authorities to track and regulate these activities.


While Dabba trading might seem like an easy way to make quick money, it’s essential to understand the risks involved and the legal implications. As responsible investors, it’s crucial to invest through legal and recognized channels to ensure the safety of our investments and contribute to the stability of our financial system.

Remember, while the allure of quick profits can be tempting, the path of legality and ethics in trading is always the best course to follow. Stay informed, stay legal!

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