Two Adani group stocks Adani Ports and Special Economic Zone and Ambuja Cements have been removed from the additional surveillance measures (ASM) framework with effect from Monday.
These were among the three group stocks, including Adani Enterprises, which were put under the ASM framework earlier, in a bid to curb excessive volatility on the counters. The Adani group stocks were battered badly following serious allegations by the US short seller Hindenburg Research that led to selloff in the conglomerate’s listed scrips.
Stock exchanges put stocks under ASM based on several parameters including high-low price variation, volume variation, delivery percentage, client concentration in stocks, close-to-close basis price variation and market capitalisation, among others.
In short, stocks with unusually high volatility are put under ASM framework. The main objectives of these measures are to alert investors to be extra-cautious and advice them to carry out due diligence while dealing in such stocks. The framework came into force in March 2018.
There are two types of ASM framework: Short term and long term. In the short term ASM, there are two stages. Stocks are retained in each stage as applicable for a minimum period of 5/15 trading sessions and are eligible for review from 6th/16th trading day onwards.
Accordingly if the stock does not meet the criteria on the review date, it is moved out of short-term ASM framework. Adani Ports and Special Economic Zone and Ambuja Cements were placed under the short-term ASM.
Stocks of public sector enterprises, public sector banks, stocks already under graded surveillance measure (GSM) and stocks under trade to trade category are excluded from the process of shortlisting of stocks under short-term ASM.
If the stock continues to meet the criteria for short-term ASM without attracting the criteria for Long-term ASM, it is subjected to the Stage II ASM framework. If it is moved to long-term ASM, short-term provisions do not apply to stocks.
Since April 2022, short-term ASM framework is extended to derivative stocks. In such a case, 50 per cent or existing total margin, whichever is higher, subject to maximum rate of margins of 100 per cent.
As per NSE, applicable margin rate for the stocks under ASM Stage I is 50 per cent or existing margin, whichever is higher, subject to a maximum margin of 100 per cent. For stage II, the applicable margin rate is 100 per cent or existing rate, whichever is higher.
This means 100 per cent of the traded value gets blocked as margins. Exiting the ASM means traders would no longer require to pay 100 per cent upfront margin to avail intraday leverage. At present, there are 23 stocks on NSE under short-term ASM framework. They included Adani Enterprises.
On the other hand, there are 95 stocks under long-term ASM. They included Adani Green Energy, Adani Transmission.
For stocks under long-term ASM framework, the review period is 90 calendar days. These stocks are subject to stage-wise exit. The stage wise review is done on a weekly basis.
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