A woman walks past the Bombay Stock Exchange (BSE) logo in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

BSE, NSE Put In Place Additional Surveillance Measures For Stocks

Leading stock exchanges BSE and NSE have put in place a new framework to shortlist and review stocks under enhanced surveillance measures.

Under the new guidelines, public sector enterprises and public sector banks will be excluded from the process of shortlisting of securities under ASM, the exchanges said in separate circulars.

Also read: Stocks Under Increased SEBI Surveillance Fall As Investors Sell In Panic

The move comes within a month of markets regulator SEBI initiating a probe into the alleged leak of 37 companies that were brought under enhanced surveillance before the stock exchanges made the list public. It was alleged that stocks that were to be included in additional surveillance measure were leaked to market operators before the official announcement was made by the stock exchanges.

As per the circular, it has been decided that ASM parameters along with the thresholds will be disseminated by the stock exchanges. The decision was taken after a joint surveillance meeting of exchanges and the Securities and Exchange Board of India last week.

The parameters for shortlisting securities under ASM include high-low variation, client concentration, number of price band hits, close-to-close price variation and price-earning ratio.

Also read: Companies Undergoing Insolvency To Face Enhanced Surveillance, BSE Says

The exchanges said these criteria will be applicable for selection of stocks in the ASM framework. These include high-low price variation (based on corporate action adjusted prices) of a scrip which has been 200 percent or more in last three months and concentration of top 25 clients in the last three months has been 30 percent or more.

Besides, high-low price variation of a stock is 200 percent or more in the last three months and the number of price band hits (upper or lower) in the last three months is at least 30 per cent, then the company will come under enhanced surveillance.

Another criteria would be close-to-close price variation in the last 30 trading days is 100 percent or more and the PE negative, and the concentration of top 25 clients in the last one month is 30 percent or more.

Further, a stock for which the close-to-close price variation in 365 days is greater than 100 percent and high-low variation of 200 percent or more during the period, market cap of over Rs 500 crore and has high-low variation in 90 trading days of over 50 percent, will also come under the enhanced surveillance.

After inclusion in the index, the exchanges said stock filter circuit of five percent will be applicable from the date of inclusion of the stock in ASM, besides, requirement of 100 percent margin to trade in such stock will become applicable from the next trade date after inclusion in the framework.

After a month, scrips having PE ratio greater than 100 shall be placed in the trade for trade segment. Further, stocks in the ASM framework will be reviewed every two months. "Scrips having PE Ratio less than 10 (PE ratio is between 0 to 10) shall be moved out of the ASM framework and close price shall become the base price for subsequent reviews," exchanges said in similar-worded circulars.

Also read: NSE Puts 60 Firms Facing Insolvency Under Enhanced Surveillance

Further, stocks having PE ratio less than two times PE ratio of the National Stock Exchange 500 index will continue to remain in ASM, however such scrips will be moved out of trade-for-trade (restrictive trade) segment.

According to exchanges, public sector enterprises and public sector banks, the securities already under graded surveillance measure, stocks on which derivative products are available and scrips already under trade-for-trade will be excluded from the process of shortlisting under ASM.