The Additional Surveillance Measure (ASM) and the Graded Surveillance Measure (GSM) are surveillance frameworks run jointly by SEBI is the statutory regulator of India's securities market, with the legal duty to protect investors and to promote and regulate that market. Read the full meaning of SEBI and the stock exchanges. ASM flags shares with unusual trading, such as price spikes and volume surges, while GSM flags shares whose prices are not justified by earnings, book value, net worth or PE. Both apply staged trading restrictions.
Individuals trying to understand what the ASM and GSM framework is will find the basic idea simple. For ASM, the exchanges monitor objective parameters such as high-low price variation and client concentration and shares that cross the limits are placed on a list. NSE and BSE republish both lists through circulars.
Stages and curbs on a listed stock
The restrictions increase in stages. GSM has four stages, from Stage I to Stage IV. Its entry criteria look at measures such as earnings, book value, net worth and the PE multiple.
Stage I brings a 100% margin and a price band of 5% or lower. Stage II adds trade for trade settlement and an Additional Surveillance Deposit (ASD) of 50% of the trade value, paid by buyers. Stage III allows trading only on the first trading day of each week, with an ASD of 100%. Stage IV adds a bar on any upward price movement.
For a buyer of shares worth Rs 10,000 in Stage II, there will be a deposit of Rs 5,000 and a Rs 100 share can move only Rs 5 a day.
Long-term ASM has stages I to IV, and a stock becomes eligible to exit after 90 calendar days, stage by stage, if the entry criteria are no longer met. Short-term ASM uses 5 day and 15 day criteria, and ASM also covers SME stocks.
Why it matters and ASM vs GSM
For investors holding such shares, selling can become difficult, as price bands, deposits and trade for trade settlement limit how the stock moves. The exchanges announce changes through circulars, usually after market hours, one trading day before they take effect.
ASM is about how a stock is trading, while GSM is about whether its price fits the fundamentals. Being on either list is not proof of wrongdoing. A share already under GSM is excluded from ASM shortlisting.