The Indian stock market is highly volatile and a lot of national money has been put into it. Therefore investors are at high risk of market plunging downturns.
To safeguard the risk and maintain the integrity securities market, the SEBI (security and exchange board of India) acts as a regulator.
SEBI has derived the format of ASM (additional surveillance measures) and GSM (graded surveillance measures).
ASM and GSM lists are the lists of securities which is prepared by SEBI. It is not a stringent list and changes from time to time.
The securities included in the ASM category are based on volatility, price variation, client concentration, market capitalisation, volume variation and delivery percentages.
Whereas for GSM the criteria are to match the real-time stock price to their fundamental value and the company’s financial health.
A company’s Earnings, Books Value, Fixed Assets, Net Worth, P/E multiple, Market Capitalization etc. are judged by its share price in the securities market.
The objective of ASM and GSM stocks
There are two major objectives of additional surveillance and graded surveillance measures:-
- Alert and advise investors to be extra cautious while trading in securities under ASM and GSM list
- Advise market participants to carry out necessary due diligence while dealing in listed securities
Top Stocks in ASM list as of 20th June 2022
- Adani powers (NSE) stage I
- Adani Wilmar stage IV
- Macrotech developers stage I
- Gujrat fluorochemicals stage I
- Trident stage I
Top Stocks in GSM list as of 20th June 2022
- Unitech (NSE) stage 0
- Inspirisys Solutions stage I
- Ballarpur Inds. (Nse) stage 0
- Trf (Nse) stage III
- Spacenet Enterprises India stage IV
How investors are affected?
The stocks put under ASM or GSM has to follow restrictions. With each succeeding stage they reach in lists, higher restrictions are imposed.
In ASM stocks, traders need to have a 100 % margin as a requirement under the rules and the circuit filter is at 5 %. By this circuit filter, traders’ loss or profit is limited as the price cannot fluctuate beyond 5% and thus reduces volatility.
Now as this creates negative bais, the prices of listed stocks decline sharply in the short run, this can create losses for investors. However, if you trade long-term with the strong fundamentals of the company, your portfolio may not be affected by such fluctuations.
Stocks under ASM are affected as low leverage reduces the volume in the counter. Therefore they cannot be used as collateral by the investors. This will cause low liquidity for such stocks in the market.
For GSM the restrictions play their role depending upon various stages. For general investors, as the stocks slide into GSM, the margin requirement is 100% and a 5% or less price band is applicable.
Depending upon the stages, the buyer also needs to deposit an additional surveillance deposit as 50% of the total trade value.
More often, for ASM the intermediaries do not take up intraday trading and for GSM intermediaries do not allow intraday or delivery trades.
Panic during such situations will lead to more losses than profits. As an investor, your patience has to be aligned with your awareness.
The stocks are simply added to ASM or GSM just to correct their market prices and protect investors from high fluctuations, thus it does affect the fundamental value of the stock.
As a value investor, you should stick to the long-term commitment until the predictions follow in the opposite direction.
Since ASM and GSM lists are short-term, the major changes occur in the positions of intraday or weekly traders.
The recommendation to investors stays at holding up the position rather than panic selling.
During ASM stocks, it is highly believed that if a stock is fundamentally strong, the price will shift up way more, thus panic selling is not a wise option but buying more does seem a good choice.
Volatility is an integral part of Indian security markets so does investor protection. For controlling both beyond the maximum tolerance limits, SEBI regulates the ASM and GSM lists. Basically, these lists provide an indicator for investors to view the risky side of included securities. It provides early signals for precautions and judgements over upcoming market strategies.
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