Understanding what is ASM List: Markets are hard enough to track. No one can 100% accurately predict the movement of the stock. On top of this, the Indian stock market has had its own share of manipulations and scams. This always comes at the expense of retail investors who are caught in between.
Recognizing this the Indian market watchdog has brought forth several sets of regulations and restrictions in an attempt to protect investors.
In this article, we take a look at one such important initiative by the SEBI known as the Additional Surveillance Measure (ASM). Keep Reading to find out what is ASM List. what a stock being in the ASM list means and why it is there in the first place!
What is ASM list in the Indian Stock Market?
Every irregularity or loophole exploited leads to the Indian stock market losing its credibility. The SEBI (Securities and Exchange Board of India) has introduced a host of measures in order to ensure that investors interests are protected. The Additional Surveillance Measures (ASM) list are part of these proactive surveillance initiatives introduced by the SEBI and Indian exchanges.
The ASM list is a list that includes securities that are currently under surveillance due to price variation, volatility, volume variation etc. This list is created with the objective to alert investors to be cautious while dealing in these securities. SEBI and the exchanges select add securities that have concerns to this list based on the following parameters:
- High Low volatility
- Client Concentration
- Closure to Closure Price Variation
- Market Capitalization
- Volume Variation
- Delivery %
- No. of Specific PANs
- PE
What are the Different Types of ASM list?
There are mainly 2 types of ASM i.e. Long term ASM and Short Term ASM. Just as stocks are added to the ASM list based on predetermined criteria, they are also further segregated based on predetermined criteria which we will discuss as follows for the two.
Long-Term ASM List
Based on the satisfaction of the following conditions they are allocated the stages in this list.
Condition 1
High-Low Price Variation for 3 months should be greater than or equal (150% + Beta of the stock * Nifty 50 Variation)
At the same time the concentration of the top 25 clients must be greater than or equal to 30% of combined trading volumes of NSE and BSE in the last 30 days.
Condition 2
At the same time the concentration of the top 25 clients must be greater than or equal to 30% of combined trading volumes of NSE and BSE in the last 30 days.
The Close to close price variation for the last 60 trading days is greater than or equal to (100% + Beta of the stock * Nifty 50 variation)
Condition 3
The Close to close price variation for the last 365 days is greater than or equal to (100% + Beta of the stock * Nifty 50 variation)
At the same time, the High-Low Price Variation for 3 months should be greater than or equal (150% + Beta of the stock * Nifty 50 Variation)
This criteria also has 2 more clauses that the Market Cap of the company is more than Rs 500 crores. In addition to this the concentration of the top 25 clients must be greater than or equal to 30% of combined trading volumes of NSE and BSE in the last 30 days.
Condition 4
Inorder to fulfill this criterion the average daily volume in a month is greater than or equal to 10000 shares and greater than 500% of the average volume during the last 3 months at BSE and NSE, At the same time the concentration of the top 25 clients must be greater than or equal to 30% of combined trading volumes of NSE and BSE in the last 30 days.
In addition to this there are a few more criterions. Here the Average Delivery % is greater than 50% in the last 3 months and the Market Cap of the company is more than Rs 500 crores. Also the Close to close price variation for the last 1 month is greater than (50% + Beta of the stock * Nifty 50 variation).
Stages
Based on the above criterion the stocks are added to one of the 4 stages. Now let us take a look at the action that the stocks face according to the stage they are in:
Stage 1
The applicable margin shall be 80% from T+3 days for all clients
Stage 2
The price band is reduced to the next lower level and the applicable margin shall be 100% from T+3 days for all clients.
Stage 3
Price band is further reduced to the next lower level and the applicable margin shall be 100% from T+3 days for all clients.
Stage 4
This is the final stage and the settlement will be on a gross basis with a 100% margin on all clients and a 5% price band.
Short-Term ASM List
Here the stocks have 2 stages. Based on the satisfaction of the following conditions they are allocated the stages in this list.
Stage 1
The stocks added to this category will first be given a chance to provide clarification. The information of the stock being added to the Short term ASM will be displayed in the website to update the investors.
The applicable margin rate for these stocks will be 1.5 times the existing margin or 40% whichever is higher. The maximum margin is capped at 100%
Stage 2
The stocks added to this stage will have an applicable margin rate for these stocks will be 2.5 times the existing margin or 80% whichever is higher. The maximum margin is capped at 100%.
Do all stocks face the risk of being added to this list?
This list includes certain exceptions. This means that the following stocks cannot be added to the ASM list:
- PSU’s
- Securities with derivative products
- Stocks under trade to trade segment
What Should an Investor Do if They Find Their Stocks in ASM List?
First of all, it is important for investors to understand that stocks being added to this list are not facing disciplinary action. This is a mechanism to control the price movement to protect investors and alert them to proceed with caution when it comes to the stocks in the ASM list.
That’s all for this post on what is ASM list? Let us know what you think about norms put forward by SEBI in the comments below! Happy Investing!
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