Smith Bagley, a prominent Washington socialite and campaign fundraiser for President Carter, was indicted yesterday on conspiracy, fraud and stock manipulation charges.

The indictment of Bagley and four associates, returned by the federal grand jury in Winston-Salem, N.C., revolves around alleged efforts by Bagley to inflate the value of his business, The Washington Group Inc., artificially in order to boost the sale of its stock.

Among the chief victims, according to the indictment, were low-income wage-earners at companies held by The Washington Group in North Carolina. The employes were allegedly induced by fraud to take out personal loans and invest in the Bagley stock.

The defendants illegally got the employes' profit-sharing plan to sell bluechip stocks it held at a $480,000 loss and reinvest the money in The Washington Group, the grand jury charged.

All the time, according to the indictment, Bagley and the others "well knew that the company was suffering serious business and financial difficulties," which ultimately led to bankruptcy.

Bagley and a former partner, James R. Gilley, each were indicted on 10 counts of conspiracy, mail fraud, wire fraud, bank misapplication and securities violations, all felonies. Accused with them on a lesser number of counts were three business associates, Dewey W. Chapple, Shirley M. Grubb and William F. Thomas.

Bagley's North Carolina attorney, William Osteen, responded by stating that "Mr. Bagley denies the charges made against him."

Prosecutors, led by assistant U.S. Attorney Patricia Lemley and Justice Department special attorney Robert G. Clark, had intended on bringing the indictment two weeks ago, but were delayed at the last minute by ranking Justice Department officials responding to appeals from Bagley's lawyers for another hearing.

The Washington Group was formed in 1972 when Bagley, heir to the R. J. Reynolds tobacco fortune, teamed up with Gilley and merged an ice cream company into a textile firm called Washington Mills.

Washington Group began acquiring smaller North Carolina companies and quickly became a darling of Wall Street, its stock rising in over-the-counter trading from $13.50 to $31.50 in 1974.

According to later audits and yesterday's indictment, however, that escalating price was artifically pumped up with funds fraudulently obtained.

The purpose of the scheme, according to the indictment, was to "increase the actual and apparent personal wealth of the defendants, to facilitate the acquisition of other companies and to create the facade of a successful and well-managed company."

Eight profit-sharing plans set up for the benefit of Washington Group employes were central to the scheme, according to the indictment.

Prior to February 1974, the assets of the employe plans were invested in conventional and reputable securities.

The defendants at first allegedly tried unsuccessfully to get the plans' trustees, the Wachovia Bank and Trust Co. of Reading, Pa., in exchange for a promise that about 50 percent of the assets would be invested in The Washington Group.

American Bank then allegedly sold the good stocks at a loss of $480,000 to employe participants and bought the artificially inflated Washington Group stock.

Bagley, Gilley and Thomas also allegedly devised a scheme whereby they would try to make even further sales of the stock to company employes through a stock purchase program. Loans, with the inflated stock as collateral, were arranged for the employes to help them make the purchases.

The Securities and Exchange Commission is also preparing civil charges in connection with The Washington Group transactions.

Bagley was an active, though not a major, fund-raiser for Carter's 1976 presidential campaign. After Carter was elected, Bagley became a social figure in Washington and entertained Carter at Bagley's Georgia vacation home, Musgrove Plantation.

Gilley was the executive vice-president of The Washington Group. Chapple was vice-president of the Winston-Salem Branch of the Northwestern Bank. Thomas was vice-president of Interstate Securities, Inc., a brokerage in Winston-Salem, and Shirley Grubb was Bagley's administrative assistant.