ASM (Additional Surveillance Measure)
The Additional Surveillance Measure (ASM) is a framework implemented by NSE and BSE under SEBI guidance to identify stocks exhibiting abnormal price or volume behaviour, placing them under enhanced monitoring with higher margin requirements.
The ASM framework was jointly introduced by NSE and BSE in March 2018 following SEBI's direction to strengthen surveillance mechanisms against stocks experiencing unexplained price and volume anomalies. The objective was to protect retail investors from entering positions in stocks where price discovery might be distorted by speculative or manipulative activity, while also deterring such activity through increased transaction costs and margin requirements.
Stocks were placed on the ASM list based on quantitative criteria including: high price percentage change in a defined period relative to the benchmark index, unusually high or low price-earnings ratio, a high proportion of client concentration in trades (few entities driving most of the volume), unusual delivery percentage changes, and volatility metrics. The criteria were reviewed periodically, and stocks could move from lower to higher stages of ASM based on continued anomalous behaviour, or be removed if conditions normalised.
The practical impact of ASM inclusion on a stock was immediate and significant. Margin requirements for trading ASM stocks were increased substantially — sometimes to 100 percent of the trade value — effectively eliminating leverage for intraday traders and making speculative short-term activity far more capital-intensive. Futures and options on ASM stocks were also affected, with higher margin requirements. Some brokers chose to restrict intraday trading in ASM stocks entirely, allowing only delivery-based transactions.
For investors already holding shares of a company that entered the ASM list, the immediate effect was often a sharp price decline as traders and leveraged participants were forced to reduce or close positions. This involuntary selling pressure could temporarily disconnect the stock's price from its fundamental value, creating both risks for existing holders and potential entry considerations for investors able to make a long-term assessment of the underlying business.
An important nuance was that ASM inclusion was surveillance-driven, not necessarily indicative of fraud or manipulation. Some companies entered ASM due to genuinely rapid business growth that caused their price-earnings ratio to appear abnormally high, or due to concentrated holdings among a few large shareholders. Conversely, ASM was also a precursor framework for the more stringent Graded Surveillance Measure for stocks where anomalous behaviour persisted or intensified.