Three Adani scrips come under the ASM framework. Should you be worried?

Three scrips of Adani companies under the ASM framework

ASM Framework

The Adani Group has been in the news for all the wrong reasons. The FPO (Follow-on Public Offer) received a cold response, the Hindenburg report, the falling stock prices, the withdrawal of the FPO, and the list goes on. In a recent move, following a steep fall in scrip prices, the National Stock Exchange (NSE) has placed three Adani scrips under the ASM framework. The scrips in question are Adani Ports, Adani Enterprises and Ambuja Cements. Let’s understand what it means.

Related - Here are the top 10 facts about the Adani FPO that was withdrawn

The ASM framework – the concept

ASM is the abbreviation of Additional Surveillance Measure. It was introduced by the Securities and Exchange Board of India (SEBI) and the stock exchanges in 2018. The objective was to measure and contain risk and place surveillance on stocks which are highly volatile. This would be in investors' interest and warn them to keep an eye out for unusual price movements in specified stocks.

How does the ASM framework work?

Once stocks are placed under the ASM framework, they are continuously monitored for price fluctuation and volatility. Strict surveillance is placed on such stocks though it does not imply an adverse action against the company. 

The stocks are surveilled on pre-defined parameters and then moved to the Trade for Trade segment once the parameters are fulfilled. The parameters include the following –

  • Client concentration
  • High low variation
  • Close-to-close price variation
  • Volume variation
  • Market capitalization
  • Delivery percentage 
  • Price to Earnings Ratio (PE ratio)
  • Number of unique PANs

Once the stock is placed under the ASM framework, the trading volume of the stock is blocked as margins. No leverage is given for intraday trading.

Other aspects of the ASM framework

Companies can continue offering bonuses and dividends on stocks under the ASM framework. If an investor has pledged a stock which is later placed under ASM, he will not get any further collateral margin on such stock. In such situations, the investor can choose to unpledged the stock or keep it without collateral until it is moved out of the ASM framework. 

Investors in Adani Ports, Adani Enterprises and Ambuja Cements will not be affected though the ASM framework is in place. However, you should watch the stock price movements as the stocks are experiencing considerable volatility. 

Related - Read whether you should stay invested in Adani after the Hindenburg report

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