The Additional Surveillance Measure (ASM) is a regulatory framework introduced by SEBI in 2018 to monitor highly volatile stocks in the Indian stock market. It identifies securities with significant price fluctuations, trading volume changes, and overall volatility, placing them under closer scrutiny.
The purpose of the ASM list is to raise investor awareness and caution when dealing with such stocks, ensuring market integrity and protecting retail investors from speculative risks. The framework is aimed at surveillance, not punitive action against listed companies.
Criteria for ASM List Stocks
The ASM List stocks are selected based on criteria set by SEBI and stock exchanges, including factors like close-to-close price variation, high-low variation, client concentration, market capitalization, volume variation, delivery percentage, number of unique PANs, and price-earning ratio (PE). These parameters help assess volatility and risk, ensuring the effective monitoring of potentially unstable securities.
Stages of ASM
Stage 1:
In Stage 1, securities are identified based on specific entry criteria, such as price volatility and trading patterns. Once these criteria are met, a 100% margin requirement is enforced from the third trading day (T+3).
Stage 2:
Stocks already in Stage 1 can move to Stage 2 if they meet additional conditions over five consecutive trading days. These conditions include a high close-to-close price variation and a significant concentration of trading volume from the top 25 clients.
In Stage 2, the price band is reduced to the next lower level, and the margin requirement remains 100% from T+3, further controlling risk and discouraging excessive volatility.
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Stage 3:
Stocks that meet the Stage 2 conditions for another five consecutive trading days move to Stage 3. Similar criteria as Stage 2 are applied, such as Close-to-Close price variation and high client concentration.
In Stage 3, the price band is again reduced to the next lower level, and the 100% margin requirement continues from T+3, signaling even more caution and further restricting speculative trading.
Stage 4:
In Stage 4, securities that have been in Stage 3 for five consecutive trading days must meet the same criteria, including high price variation and client concentration.
The primary action in Stage 4 is the settlement of transactions on a gross basis, meaning the full value of the transaction must be paid. A 5% price band is imposed, and the margin requirement is still 100% for all clients, ensuring even stricter controls to manage risk and prevent further volatility in the stock.
List of long-term ASM stocks that might exit from Stage 1:
- Garden Reach Shipbuilders & Engineers Ltd
- Diffusion Engineers Ltd
- Vintage Coffee & Beverages Ltd
- The Investment Trust of India Ltd
- Windlas Biotech Ltd
- Duncan Engineering Ltd
- Manorama Industries Ltd
- Ceinsys Tech Ltd
- Prudent Corporate Advisory Services Ltd
- The Anup Engineering Ltd
In conclusion, if security meets the required criteria after completing 90 trading days in the Long-Term Additional Surveillance Measure (LTASM), it will be eligible to exit the ASM list. The stage review is conducted weekly to assess if the conditions for exit are met, ensuring continuous monitoring of market behavior.
Written By – Nikhil Naik
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