What is ASM?
Additional Surveillance Measure( ASM) is a regulatory tool issued by stock exchange with participation SEBI (Securities and Exchange Board of India).
The main goal of ASM is to protect investors, and prevent such malpractices as market manipulations and generalized panic in selected shares. ASX-listed stocks that are characterized by extreme price fluctuations, high risk of price fluctuation, or low trading frequency may be regulated under the ASM regime.
Introducing the ASM list, regulators try to fight unsuitable trading patterns and save consumers from significant losses. Some of these lists include the ASM list itself; this does not mean that there is a bad thing said about a company’s fundamentals; however, it means that investors should be extra cautious when dealing with these stocks.
What Makes Stock Fall Under ASM
The criteria determining stocks to be categorized under the ASM list are arrived at by the exchanges. These criteria may include:
- High Price Volatility: The most common stocks that have extreme fluctuations in a given period of time.
- Abnormal Volume Activity: High volatility not associated with any specific events on the foreign exchange market.
- Price-to-Earnings (P/E) Ratio Anomalies: Objects such as shares that are over or undervalued when compared to similar shares in the market.
- Market Manipulation Concerns: Papers that appear to have been influenced by market operators.
- Low Market Capitalization: It refers to shares that offer a relatively low level of capital ranking and greater tenderness to the change of price.
- Illiquidity: Low turnover, high risk shares with high price fluctuations.
Key Features of ASM Framework
Margin Requirement: Special measures mean higher margins which aims to prevent trading for the sake of speculative purposes.
Trading Restrictions: The stocks under the ASM list may not be intraday trading limit or may be traded on the delivery basis only.
Price Bands: Smaller price ranges is used to avoid sharp fluctuations in the price change during the course of the trading day.
Enhanced Surveillance: Ongoing evaluation of the patterns of trading in these stocks.
Periodic Review: In accordance with current raw data and current trading behavior, the list is updated from time to time.
Benefits of the ASM Framework
Investor Protection: It also protects the small retail investor from suffering losses because of wide volatile price fluctuations or market manipulations.
Transparency: Due to its ability to identify stocks with suspicious trading activity of the ASM framework adds transparency to the market.
Market Stability: This paper shall focus on the impacts that restrictions on speculative trading have on the market through analyzing the effects of components of trading on fluctuations of market stability.
Encourages Due Diligence: It makes investors incite to study the underlying facts of a share price instead of focusing on hypothetical returns.
Regulatory Oversight: Improved surveillance discourages market operators from indulging in the unethical practices.
The Google ASM Framework also leading into several disadvantages after been adopted as follows:
Negative Perception: Listing in the ASM list can make investors develop a negative perception of a stock regardless actual sound performances and or significant earnings potentials.
Liquidity Concerns: Measurements and restraints in trading can result in low stock, which is not suitable for the investors when it comes to ownership of shares.
Impact on Retail Investors: Those bearer shareholders who invested through the ASM mechanism in the stocks of companies listed on the Johannesburg stock exchange may find it difficult to offload their stocks.
Market Overreaction: Stocker panics when they get affected by the ASM list inclusion, which also affects the stock prices.
Broad Criteria: At points, the inclusion criteria may pin down companies that are fundamentally quite healthy, creating undue focus to investors.
Check the following to know whether a stock is in the ASM list;
Investors can follow these steps to determine whether a stock is under the ASM framework:
- The official websites at – National Stock Exchange (NSE) or Bombay Stock Exchange (BSE).
- Click the “Surveillance” option in the available list of options.
- Download the latest list of stocks in ASM released by the exchanges.
- Look at the position by entering the ticker symbol or stock’s name.
ASM Listed Stocks: How to Trade Them?
When we deal with stocks that are categorized under ASM there are much need for care especially during the trading process. Here are some tips:
Understand the Fundamentals: Learn about its performance, strategies, and trends within the sector it operates.
Avoid Speculation: Do not trade on these stocks as they are flagged for manipulative activities.
Diversify Portfolio: Expansion is recommended to be moderated by ASM-listed stocks; the extent of investment in such firms should not be overly concentrated but rather diversified.
Use Delivery-Based Trading: Avoid the game of the day and concentrate on the big picture instead.
Monitor Updates: Monitor this list periodically, as well as the causes of the change to the list of ASM stocks.
Analyzing the Reaction of the ASM Listing on the Shares
Short-Term Volatility: Daily changes might be significantly brought about by variations in the availability of stocks and in the market sentiment.
Reduced Trading Activity: Higher margins and restriction on trading will thus result in decreased volume.
Potential Recovery: Essentially sound stocks could bounce back once taken out of the ASM list.
Investor Behavior: Some of the effects include: ordinary investors may dump their stock and cause fluctuations in its price for some time.
Case Studies of ASM Listing
High Volatility Stock: A mid-cap stock with a 30% weekly gain without a trigger is subjected to ASM. After this, volumes of trades decreases and the stock price become more or less stable for some time at a lower level.
Market Manipulation Concerns: Low cap stock is the security that experiences anomalous volume level due to suspected operator presence. After admission to the ASM list, users are required to set price bands and margins to avoid manipulation.
Fundamentally Strong Stock: Large-cap stock is subjected to ASM because this classification of stock temporarily goes through extreme price swings. As such, the mere inclusion leads to a decline and the stock’s price rises once investor confidence is regained.
Comparison Between ASM and Other Regulatory Measures
Regulatory Perspective on ASM
Taking the view of the legal requirements, the ASM framework is in conformity with SEBI’s objective to maintain an ethical standard in the market dealings. By proactively identifying and addressing risks, SEBI and stock exchanges aim to:
- Promote investor confidence.
- Minimize systemic risks.
- Strengthen market integrity.
ASM Stocks Investor Checklist
Before investing in ASM-listed stocks, consider the following:
Check Fundamentals: Discuss the firm’s performance and possibilities of future development.
Assess Risk Tolerance: Know your ability to absorb actual potential losses.
Avoid Herd Mentality: It is important not to mirror the market blindly.
Monitor Regulatory Announcements: Information to update particular notification associated with ASM from exchanges.
Seek Expert Advice: Going for consultation with financial advisors before investing in trading ASM stocks.
Conclusion
ASM framework plays an important role in implementing EOS and ensuring that investors do not suffer from other risks related to market manipulation. Of course, the listing of a company in the ASM list may cause short-term problems for shareholders, but the result achieved is reliable and necessary for efficient functioning of the market. In turn, by appreciating the complexity of ASM-listed stocks, would-be investors can make the right choices and conquer the stock market.
FAQs on ASM List Stocks
1. What is the ASM list?
The ASM list is a notified list developed by SEBI and stock exchanges to facilitate tracking and control of scrips with suspicious abnormal movement in price or volume.
2. The reason that stocks can be placed on the ASM list is:
The stocks are included in ASM list based on such attributes as high fluctuation, high trading turnover, low capitalization or market manipulation.
3. Is stock on the ASM list bad?
Therefore, companies’ inclusion in the ASM list does not mean that their fundamental are negative. It is mainly preventive to control oscillation and activity of speculation traders.
4. As often as how frequently Listorti suggests the ASM list should be updated?
The ASM list is further subjected to periodic updating depending on trading turnovers and other parameters.
5. Am I allowed to trade on the ASM-listed stocks?
Yes, but subjecting it to some conditions which are; higher margin requirements, delivery based transactions, and tightly fixed price ranges.
6. Whether ASM restrictions affect stock prices or not?
Short selling is subjected to ASM restrictions which imply low liquidity and short term volatility, but if fundamentally sound stocks, they will regain their ground.
7. What is the way to determine whether the stock is on the ASM list?
Go to the NSE or BSE site, then look for the ASM addition on the “Surveillance” tab over the site.
8. Does ASM mean there are risks for all the stocks that are in it?
Not necessarily. A few of them might be qualified based on fundamentally strong, but cyclical, stocks, meaning stocks that have become volatile briefly.
9. For how many days are stocks kept on the ASM list?
The duration is stochastic and depends on further activity in trading and checks by exchanges.
10. If a stock that one owns becomes under ASM what should be done?
Look at the stock’s qualities, do not rush to sell your stock, and you can seek counsel from a financial planner.