How Sebi's warning system curbs GameStop-like gains in Indian stock markets

The so-called graded surveillance measure, which was introduced in 2017, is unique and helps prevent GameStop-like surges in small caps

For regulators hoping to rein in wild moves in small stocks like the 17-fold surge in GameStop Corp. last month, India has a system worth studying.

Rules created by the Securities and Exchange Board of India together with the nation’s exchanges are aimed at preventing unwarranted price swings and manipulation of stocks with a market capitalization below Rs 25,000 crore ($3.4 million).

The so-called graded surveillance measure (GSM), which was introduced in 2017, is unique and helps prevent GameStop-like surges in small caps, according to Bhargavi Zaveri, a researcher at the Mumbai-based Finance Research Group.

“The measure targets firms whose returns are believed