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Risk Management Policy


Stocks Under ASM on NSE


Frequently Asked Questions

Questions on your mind? Dont worry we have the answers!

Additional Surveillance Measure (ASM) is implemented to monitor securities that deviate from conventional norms quantified via objective parameters. SEBI in conjunction with NSE brought forth ASM to ensure that the market integrity is maintained while protecting the interest of investors. That said, a security falling under ASM does not mean that the company is about to be penalized/adversely affected.

Additional Surveillance Measure (ASM) on NSE is a framework for monitoring securities using objective parameters as follows:

  • High Low Variation
  • Client Concentration
  • Close-to-Close Price Variation
  • Market Capitalization
  • Volume Variation
  • Delivery Percentage
  • No. of Unique PANs
  • PE
NSE uses ASM to safeguard market integrity and the interest of investors, in addition to other pre-existing measures.

ASM on NSE monitors securities based on objective criteria such as price variation, client concentration, trading volume, and others. If a security falls within certain criteria, it is placed under ASM.
Then the security faces stricter trading rules, like higher margin requirements. If it continues to meet the criteria, it might face even more stricter rules.
But if it doesn't meet the criteria anymore, it can drop out of ASM. This helps keep an eye on stocks showing unusual behavior, thereby protecting investors and the market.

Stocks are selected for ASM based on criteria like:
  • High-Low Price Variation
  • Client Concentration
  • Close-to-Close Price Variation
  • Market Capitalization
  • Volume Variation
  • Delivery Percentage
  • No. of Unique PANs
  • PE
A stock will stay in ASM for a minimum of 5 or 15 trading days, depending on the stage. After this period, it can be reviewed for exit. If it no longer meets the criteria, it can leave ASM. However, if it continues to meet the criteria, it remains in ASM until it no longer does.

ASM has four stages:

  • Stage I -
    Stocks are identified based on entry criteria. The margin requirement is increased.
  • Stage 2 -
    If the stock continues to meet the criteria in Stage I for five consecutive trading days, further action is taken such as reducing the price band.
  • Stage 3 -
    If the stock continues to meet the criteria in Stage II, more stringent actions are taken like settlement on a gross basis with increased margin requirements.
  • Stage 4 -
    If the stock continues to meet the criteria in Stage III, it faces the most stringent measures such as additional price band reduction and increased margin requirements.

Stocks in ASM face various restrictions such as:

  • Increased Margin Requirements -
    You'll need to deposit more money to trade these stocks.
  • Price Band Reduction -
    Limits are placed on how much the stock price can move in a day.
  • Settlement on Gross Basis -
    Trades are settled without netting off and thereby increasing risk.
  • Higher Scrutiny -
    These stocks are closely monitored for any irregularities.
  • Stricter Trading Rules -
    Top clients might face higher margin requirements, and there could be restrictions on trading volumes.

ASM can impact a company's stock price in several ways such as:
  • Lower Volatility -
    Stricter trading rules can reduce price swings.
  • Lower Liquidity -
    Higher margin requirements and trading restrictions can reduce trading volume, affecting liquidity.
  • Investor Perception -
    Being in ASM might signal to investors that there are concerns about the stock, although there may be no adverse action on the horizon.
  • Short-Term Pressure -
    Immediate impact can include price drops due to reduced speculative trading or forced selling.
  • Long-Term Stability -
    ASM aims to ensure market integrity, which can lead to greater investor confidence over time.
ASM can impact the overall stock market in the following ways:
  • More Confidence -
    Investors feel more secure when irregularities are monitored, potentially increasing market confidence.
  • Investor Protection -
    ASM measures protect investors from potential market manipulation and other risks, fostering a healthier market environment overall.
  • Increased Stability -
    By monitoring and regulating stocks, ASM can reduce market volatility, promoting stability.
  • Risk Management -
    ASM helps in identifying and managing risks associated with certain stocks, safeguarding market integrity.
  • Market Efficiency -
    By ensuring fair and transparent trading practices, ASM contributes to a more efficient market.

Measures such as ASM ensure that investors can feel confident while entering the market, as regulatory mechanisms lead to greater transparency and trust within the market.

Buying stocks under ASM may have implications for investors, specifically about factors such as higher margin requirements and lower liquidity.

Buying a stock that's under ASM means potentially dealing with risks such as:

  • High Margin Requirements
  • Lower Liquidity
  • Negative Market Perception

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