Additional Surveillance Measures continue to weigh heavy on scrips

Stocks lose a fifth of their value, even as Sensex hits new highs

Companies in the Additional Surveillance Measure (ASM) list have significantly underperformed the market. An analysis of a number of stocks on the list showed they lost around a fifth of their value even as markets hit new highs. 

The S&P BSE Sensex hit a lifetime high of 36,747.87 on Wednesday.

Companies under ASM fell up to 68.83 per cent from June 1 (the last trading day before the mechanism was applicable) to July 18, data compiled by Business Standard showed. 

The ASM is a special mechanism under which shares are restricted from making large moves, since investors are prevented from making leveraged bets on companies with unusual stock moves. 

The list of companies under ASM are updated on a regular basis. Stocks in the list need 100 per cent margin. They are also subject to a five per cent limit on the share price movement. The stocks are reviewed twice a month to determine if they are in a position to exit the mechanism. 

Eighty-seven out of the 109 companies under consideration are on the decline. A total of 34 stocks have fallen 25 per cent or more. JBF Industries has seen the biggest fall at 68.8 per cent. Goenka Business & Finance, ACI Infocom and Mohota Industries have all fallen over 50 per cent. 

Stock exchanges put out an updated list on Wednesday. The total number of securities under the ASM framework on the BSE is now 126. The National Stock Exchange’s list contains 76 securities. 

“Market participants may note that the above Framework shall be in conjunction with all other prevailing surveillance measures being imposed by exchanges from time to time. …Also, it may also be noted that the shortlisting of securities under the aforesaid framework is purely on account of market surveillance and it should not be construed as an adverse action against the concerned company/entity,” the exchange said in a notification on Wednesday. 

An investor association has written to the regulator on the sudden fall in share price after inclusion in the ASM list. 

“Declaration of such scripts should be done through an advance notice. The surprise element in declaring such scripts affects the confidence of investors,” according to the letter reviewed by Business Standard.