As an investor our aim to earn the profit but at the same time, we also want to protect our capital. Many times we are thinking that how to find the stocks which are operator driven or are being manipulated? To check this we may check the stock movement, a sudden spike in the price and volume of the script. This you have to find on your own. There is a technique which is called additional surveillance measure implemented by both the major exchanges BSE and NSE.
The Exchanges have put specific stocks under this surveillance system and hence the price of these stocks are moving down rapidly. Investors are wondering what to do about the stocks in ASM if they have any in their portfolio. Let’s understand the term ASM and further, I will also help you to take a decision about what you should do if your portfolio has any of the ASM stocks.
What is Additional Surveillance Measure?
It is a newly introduced technique by SEBI to keep a tab on market speculation and manipulation. High volatile and risky stocks are placed under this list. You will be surprised to know that many multi-bagger stocks which have given very good returns in the last year are also placed under this watch list. To name a few, Graphite India, HEG, Dilip Builicon etc. are under this list. This technique was introduced by NSE on 21st March 2018. There are 4 stocks from group A as well into this list.
There will be some restriction on such scripts like
stock filter circuit will be revised to 5%
100% margin required to trade in such stock
Further, if the above mentioned measured don’t achieve the desired objective then the stock is a move to T2T segment i.e. Trade to Trade segment. In the Trade to trade segment, Intraday trading is not allowed and the buyer has to compulsory take delivery of the stocks.
As per the NSE, this measure is taken on securities is purely on the account of market surveillance which should not be considerd as any adversed action against the company.
An investor or trader can keep a watch on stocks in Additional Surveillance Measure (ASM) as it is a good indicator to identify stocks with speculative activity, manipulation or stocks under the operator’s influence. Following 5 parameters are used for shortlisting securities under Additional Surveillance Measure (ASM)
a. High Low Variation
b. Client Concentration
c. No. of Price Band Hits
d.Close to Close Price Variation
e. PE Ratio
The exchanges will review the list every 2 months and make the changes as per the ASM framework.
There is another surveillance system also which is called GSM ( Graded Surveillance System)
What is the Graded Surveillance Measure?
There is an another more stringent measure introduced by SEBI to counter abnormal price and volume rise which are not in line with the financials of the companies.
Why are such stringent measures required?
The main reason behind such measures is to alert and protect investors from the market manipulation. SEBI may put companies under surveillance based on the abnormal price hike without any strong backing of financials of the company. Such measure will send a strong alert message to all investors to be an extra cautious while purchasing the security.
How the Graded Surveillance Measure works?
There are six stages of the graded surveillance system. Each stage has its own restrictions and it will become more and more stringent as you move up the stage.
In the first stage, the security is put into T2T (trade to trade) segment. In which no speculation is allowed. There will be a ban on intraday trade. You have to give 100% margin to purchase the security.
The second measure is it allows a maximum of 5% movement in share price. Meaning circuit filter is revised to 5% only. In the second stage, a buyer has to put 100% of trade value as for additional surveillance deposit. The deposit will be retained by the exchange and will be refunded after 5 months in a phased manner.
In the third stage, the trading of such security is allowed only once a week I.e. every Monday.
In the fourth stage, trading would be allowed once a week and additional security deposit increases to 200% of the trade value.
In the fifth stage, trading would be allowed only once a month I.e. First Monday of the month with the additional security of 200%.
In the sixth stage, trading is permitted once a month with zero upward movements allowed in the price. The additional security deposit of 200% is required at this stage as well.
Will securities remain permanently in the Graded Surveillance list?
The SEBI would review a security every quarter. Based on the criteria the would move from higher to lower stage as mentioned above.
What does this mean for an investor?
- Under this surveillance the trader will have to deposit 100% of the margin, this means there will be no margin available.
- The stock circuit will be filtered @ 5%
- Intraday trading for such script will not be possible.
- If you are an investor, it will affect you adversely as due to this surveillance the panic situation will be there and people will start selling the stocks which will bring the price down.
- If you are a long-term investor, you need not worry as this is a short-term effect.
- This system will help the investor to have one more criterion while choosing stocks for investment.
List of the securities under ASM
Here is the list of securities under ASM list as on 20th August 2018.
- 8K Miles Software Services Ltd
- ACI Infocom Ltd
- Action Construction Equipment Ltd
- Adani Green Energy Ltd
- Alok Industries Ltd
- Amtek Auto Ltd
- Andhra Petrochemicals Ltd
- Apex Frozen Foods Ltd
- Arcotech Ltd
- Arrow Greentech Ltd
- Ashari Agencies Ltd
- Atlas Jewellery India Ltd
- Bharat Rasayan Ltd
- Bhushan Steel Ltd
- Bil Energy Systems Ltd
- Bombay Dyeing & Manufacturing Company Ltd
- Bombay Rayon Fashions Ltd
- Bullish Bonds & Holdings Ltd
- Butterfly Gandhimathi Appliances Ltd
- Castex Technologies Ltd
- Chokhani Securities Ltd
- Cigniti Technologies
- Commex Technology Ltd
- Diamond Power Infrastructure Ltd
- Dil Ltd
- Dolat Investments Ltd
- Electrosteel Steels Ltd
- Emami Infrastructure Ltd
- EMCO LTD.
- Excel Industries Ltd
- Excel Realty N Infra Ltd
- Fedders Electric and Engineering Ltd
- Fineotex Chemical Ltd
- Forbes & Company Ltd
- Fredun Pharmaceuticals Ltd
- Gala Global Products Ltd
- Generic Engineering Construction and Projects Ltd
- GM Breweries Ltd
- Goenka Business & Finance Ltd
- Graphite India Ltd
- GTL Infrastructure Ltd
- Gujarat Ambuja Exports Ltd
- GVK Power & Infrastructure Ltd
- Hindustan Foods Ltd
- India Glycols Ltd
- Indiabulls Integrated Services Ltd
- Indiabulls Ventures Ltd
- International Paper Ltd
- IOL Chemicals & Pharmaceuticals Limited
- IVRCL Ltd
- J Taparia Projects Ltd
- Jaypee Infratech Ltd
- JBF Industries Ltd
- Jindal Worldwide Ltd
- JVL Agro Industries Ltd
- KDDL Ltd
- Kiri Industries Ltd
- Kretto Syscon Ltd
- KSK Energy Ventures Ltd
- KSL & Industries Ltd
- KSS Ltd
- Lakshmi Precision Screws Ltd
- Lasa Supergenerics Ltd
- Lincoln Pharmaceuticals Limited
- Manpasand Beverages Ltd
- Merck Ltd
- Metalyst Forgings Ltd
- Millitoons Entertainment Ltd
- Mirc Electronics Ltd
- Mohit Industries Ltd
- Monnet Ispat & Energy Ltd
- Morepen Laboratories Ltd
- MOSER BAER INDIA LTD.
- MRO-TEK Realty Ltd
- Nagreeka Capital & Infrastructure Ltd
- National Steel and Agro Industries Ltd
- Nelco Ltd
- Niyogin Fintech Ltd
- Oasis Tradelink Ltd
- Olectra Greentech Ltd
- Omkar Speciality Chemicals Ltd
- Optiemus Infracom Ltd
- Oscar Investments Ltd
- Paushak Ltd
- Petron Engineering Construction Ltd
- Quadrant Televentures Ltd
- Radico Khaitan Ltd
- Rain Industries Ltd
- Rama Vision Ltd
- Ramgopal Polytex Ltd
- Ramky Infrastructure Ltd
- Reliance Naval and Engineering Ltd
- Responsive Industries Ltd.
- RMG Alloy Steel Ltd
- RSD Finance Ltd
- S R K Industries Ltd
- Sadhana Nitro Chem Ltd
- Safari Industries India Ltd
- Sai Baba Investment And Commercial Enterprises Ltd
- Seamec Ltd
- Shilpi Cable Technologies Ltd
- SORIL Infra Resources Ltd
- Sri Adhikari Brothers Television Network Ltd
- Sri Krishna Constructions (India) Ltd
- SRS Finance Ltd
- SRS Ltd
- SRS Real Infrastructure Ltd
- Stampede Capital Ltd
- Stampede Capital Ltd – DVR
- Sterling Biotech Ltd
- Sulabh Engineers & Services Ltd
- Sunil Hitech Engineers Ltd
- Sunstar Realty Development Ltd
- Super Spinning Mills Ltd
- Supreme Holdings & Hospitality (India) Ltd
- Supreme Infrastructure India Ltd
- Swadeshi Industries & Leasing Ltd
- Swaraj Automotives Ltd
- Tamil Nadu Newsprint & Papers Ltd
- Tiaan Ayurvedic & Herbs Ltd
- Transwarranty Finance Ltd
- TV Vision Ltd
- TVS Electronics Ltd
- Uniply Decor Ltd
- Unity Infraprojects Ltd
- Usher Agro Ltd
- Uttam Value Steels Ltd
- Veer Energy & Infrastructure Ltd
- Viceroy Hotels Ltd
- VIP Industries Ltd
- Visesh Infotecnics Ltd
- VKJ Infradevelopers Ltd
- V-Mart Retail Ltd
- WPIL LTD
- Yuken India Ltd
- ZEN Technologies Ltd
- Zenith Exports Ltd
Investors and Traders have blamed SEBI
Investors and brokers have blamed SEBI for imposing such a stringent surveillance system in the market. Investors now have to give higher margins to buy these securities that too will not move up after a certain percentage. They also have raised a question against the methodology used to filter the stocks. As per the investors, these measures have pulled out the liquidity from the small and mid-cap shares instead of punishing manipulators.
The stocks which are in ASM list have declined as much as 50% due to the fear factor. There are several other traders who are wanting to invest in small and mid-cap shares, have now changed their mind and stay away from entering into this segment. On the other side, investors cannot afford to shell out 100% margin every time. So they also stay away from the market.
As per the investor community, valuation measured by price to earnings ratio, should be determined by the market and not by the capital market regulators i.e. SEBI. So instead of targeting manipulators, here investors and traders have become the victim.
I think SEBI should have gone case to case basis. Upon finding such malpractice in the trade, they should have informed the trader and broker about such malpractice and warn them directly.