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Graded Surveillance Measure (GSM) is a framework implemented by SEBI and NSE to monitor and control trading in certain securities. It aims to boost market integrity and protect investor interests by imposing various preemptive measures on stocks showing unusual price movements or not aligned with their financial fundamentals. These measures include trading restrictions, increased margin requirements, and other actions to ensure investors exercise caution and due diligence when dealing with such securities.
In the National Stock Exchange (NSE), Graded Surveillance Measure (GSM) is a framework brought forth to monitor and regulate trading in certain securities that exhibit unusual price movements, financials, or fundamentals. The goal of introducing GSM was to protect investor interests and market integrity through trading restrictions, higher margin requirements, and other actions. These preemptive measures ensure investors exercise caution and due diligence when dealing with securities falling under the GSM framework.
Here are the stages of GSM:
In the GSM framework, stocks face several restrictions that vary across different stages. Initially, a 100% margin requirement is imposed, and a price band of 5% or lower is applied. As a stock moves to further and further, no upward price movement is allowed in addition to other restrictions.
GSM is important for investors because it helps safeguard their interests by reducing excessive speculation and volatility in specific securities, ensuring a more stable and secure investment environment. It provides investors with increased confidence in the market and helps mitigate risks associated with highly speculative trading activities.
Buying GSM stocks can be riskier due to tighter trading restrictions and potential volatility. It's essential to conduct thorough research and understand the implications of GSM on the stock's liquidity and price movement. While GSM aims to stabilize the market, investors should weigh the risks and benefits before investing in these stocks.
Investing in stocks under the GSM category carries risks such as reduced liquidity due to trading restrictions, increased price volatility, and potential negative market perception. Additionally, these stocks may experience higher trading costs, and their prices could be impacted by sudden changes in trading conditions or investor sentiment. It's crucial for investors to carefully assess these risks and consider their investment objectives before trading GSM stocks.
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