Part 38 Understanding ASM Stocks SEBI’s Surveillance Framework Explained
Part 38 Understanding ASM Stocks SEBI’s Surveillance Framework Explained
ASM Stocks: Meaning, Timeline, and Trading Restrictions
What is ASM in the Stock Market?
Meaning
ASM stands for Additional Surveillance Measure.
It is a regulatory framework implemented by the Securities and Exchange Board of India (SEBI) in collaboration with major stock exchanges like the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) to monitor and regulate securities (stocks) exhibiting unusual or abnormal trading patterns.
This includes sudden spikes in price, high trading volumes without corresponding fundamentals, or excessive volatility, which could indicate potential market manipulation, speculation, or risks to investor safety.
When a stock is added to the ASM list, it faces enhanced scrutiny and trading restrictions to ensure market integrity, transparency, and protection for retail investors.
Purpose -
Additional surveillance measure or ASM is a kind of regulation system to monitor and regulate the various trading activities of particular securities.
The main motive of ASM is to keep checking the price movement, trading volume, volatility and participants to protect the investors from unusual activities.
The primary goal of ASM is to safeguard the interests of investors, particularly retail participants, from manipulative practices like pump-and-dump schemes, excessive speculation, or undue price movements driven by rumors rather than fundamentals. It promotes fair trading, reduces volatility, enhances market stability, and discourages leveraged or high-risk trades in suspicious stocks.
By imposing stricter rules, ASM helps align stock prices more closely with a company's true value and prevents systemic risks in the broader market.
History and Timeline -
ASM was introduced in 2018 as part of SEBI's broader initiative to strengthen market surveillance and protect investors from volatility and manipulation.
It evolved from earlier surveillance tools and was rolled out in phases across NSE and BSE to address rising concerns over speculative trading in small-cap and mid-cap stocks.
Key milestones:
Pre-2018:
SEBI and exchanges relied on basic circuit breakers and price bands, but these were insufficient for detecting prolonged abnormal behavior.
2018:
Official launch of ASM framework, starting with short-term measures for immediate volatility spikes.
2019–2020:
Expansion to include long-term ASM for sustained issues; integration with other tools like Graded Surveillance Measure (GSM) for companies with weak fundamentals.
2021–2022:
Refinements amid market booms, with more frequent updates to ASM lists during volatile periods (e.g., post-COVID recovery). SEBI mandated daily publications of ASM lists.
2023–2025:
Ongoing enhancements, including tighter integration with technology for real-time monitoring.
As of October 2025, ASM lists are updated daily on NSE/BSE websites, with over 200–300 stocks typically under surveillance at any time, focusing on sectors like renewables, infrastructure, and penny stocks.
Types of ASM -
ASM is categorized into two main types based on the duration and nature of the abnormal activity:
Targets sudden, one-off events like sharp price surges or volume spikes (e.g., due to news or rumors).
It lasts for a shorter period (typically 1–15 days) and aims for quick stabilization.
stocks in this ASM are allocated into Stage 1 and Stage 2 with different margin rates applicability for each stage.
Stage 1: The securities in this stage are allowed to get one chance to clarify, and all the information of the stock regarding short-term ASM is presented on the website to keep investors updated about such information.
Apart from this, the applicable margin rate is 1.5 times the current margin or 40% which is higher with the maximum margin capped at 100%.
Stage 2: The securities in this stage have a higher applicable margin rate of up to 2.5 times the existing margin or 80%, whichever is higher and the maximum margin is capped at 100%.
Applies to stocks with persistent issues, such as ongoing volatility over weeks or months.
It involves deeper scrutiny and can extend up to 6 months or more, often escalating to higher stages.
These types help exchanges differentiate between transient risks and structural problems.
Here's a breakdown of typical stages (combining short-term and long-term frameworks):
Stage 1
Short/Long-Term
- 100% margin requirement (no leverage or intraday trading).
- Tightened price bands (e.g., 5–10% circuit limits).
- Shift to T2T segment.
- Ban on pledging shares for loans.
Initial entry; triggered by high volatility or volume spikes. Lasts 5–15 days if unresolved.
Stage 2
Short/Long-Term
- Stricter circuit filters (e.g., 2–5% bands).
- Higher surveillance; no short-selling allowed.
- Quantity limits on orders (e.g., max 10,000 shares per order).
Escalation if Stage 1 issues persist; focuses on curbing speculation.
Stage 3
Long-Term Only
- Further reduced position limits (e.g., 25% of holding).
- Enhanced reporting requirements for large trades.
- Potential alerts to SEBI for investigation.
For prolonged volatility; rare for short-term.
Stage 4
Long-Term Only
- Maximum restrictions: Possible periodic call auctions instead of continuous trading.
- Direct exchange intervention; trading halts if needed.
- Transfer to special segment with minimal liquidity.
Extreme cases of manipulation; can lead to delisting probes.
These stages ensure a graded response, starting with warnings and escalating to controls.
Criteria for Inclusion in ASM
Stocks are shortlisted for ASM based on quantitative parameters monitored daily by exchanges.
Common triggers include:Price/Volume Variance: Sudden changes >20–50% in price or volume compared to 60-day averages.
Volatility Metrics: High standard deviation in returns relative to peers or benchmarks.
Market Cap Factors: Low free-float market cap (e.g., <₹500 crore), making manipulation easier.
Other Indicators: Client concentration (trades dominated by few accounts), news-based spikes without fundamentals, or low liquidity.
SEBI guidelines require at least 3–5 criteria to be met for inclusion, with lists published at the end of each trading day.
SEBI and Exchange jointly decide how to shortlist the securities in the ASM based on the objectives and criteria with the following parameters.
of Unique PANs
Close-to-Close Price Variation
Impact and Restrictions On Trading:
No margin funding, blocked intraday/short-selling, reduced liquidity (harder to buy/sell large quantities), and slower price discovery.
On Investors:
Short-term traders face higher costs and frustration;
long-term investors may see it as a caution but not a sell signal—fundamentals remain key.
ASM stocks often rebound post-removal due to restored confidence.
Market-Wide: Enhances overall stability but can temporarily suppress volumes in affected sectors.
Removal Process -
ASM is not permanent;
stocks exit once they stabilize (e.g., volatility drops below thresholds for 5–10 consecutive days).
The process involves:Continuous monitoring by exchanges.
Review at stage-end or weekly.
Announcement of exit on NSE/BSE websites.
Gradual relaxation (e.g., from T2T back to normal).
About 70–80% of stocks exit within 1–2 months, often leading to price recovery.
Key Facts
Scope: Applies only to equity segments on NSE/BSE; derivatives may also be restricted.
Difference from GSM: ASM focuses on trading behavior (volatility), while GSM targets company fundamentals (e.g., debt issues).
Frequency: Daily updates; as of October 2025, lists include 200+ stocks, often from SMEs or thematic sectors.
ASM doesn't imply fraud—many strong companies enter temporarily.
Check exchange sites for lists and avoid panic selling.
Below is the link to check latest ASM report on NSE with a list of all updated securities.
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