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Additional Surveillance Mechanism


Recently, The National Stock Exchange (NSE)  placed Adani Enterprises, Adani Ports, and Ambuja Cements under the additional surveillance mechanism (ASM), Reuters reported. This means trading in their shares will require a 100% margin, which is aimed at curbing speculation and shortselling.


GS III: Indian Economy

Dimensions of the Article:

  1. Additional Surveillance Mechanism (ASM)
  2. Reserve Bank of India (RBI) and Adani Group Companies

Additional Surveillance Mechanism (ASM)

  • The ASM was introduced on March 26, 2018, to protect investors from market volatility and unusual changes in share price.
  • It is a measure introduced by the Securities and Exchange Board of India (SEBI) and exchanges to address surveillance concerns in the market.
Purpose of ASM
  • The ASM was introduced to complement the existing surveillance measures in place.
  • The intention is to protect investors from unusual changes in share price and market volatility.
Shortlisting of Securities for ASM
  • The shortlisting of securities for ASM is based on criteria decided jointly by SEBI and exchanges.
  • The criteria include parameters such as price/volume variation, volatility, high/low variation, client concentration, PE, close-to-close price variation, market capitalization, volume variation, delivery percentage, and number of unique PANs.
Significance of ASM Shortlisting
  • The shortlisting of securities under ASM signals to investors that the stocks have seen unusual activity.
  • However, the shortlisting should not be construed as an adverse action against the concerned company/entity.

NoteSEBI has not announced any probe into the Adani shares crash as of yet.

Reserve Bank of India (RBI) and Adani Group Companies

  • The RBI has sought details from banks about their exposure to Adani group companies.
  • This was in response to the sustained fall in the shares of Adani group companies and the withdrawal of the follow-on public offer of INR 20,000 crore.
Action by Banks
  • Credit Suisse has stopped accepting bonds of Adani Group companies as collateral for margin loans to its private banking clients.
  • Citigroup’s wealth unit has also stopped extending margin loans to clients against securities of Adani group companies.
Possible Reason for RBI Intervention
  • The RBI’s intervention might have been prompted by the actions of Credit Suisse and Citigroup.
  • A banking source suggests that this might have prompted the regulator to step in.

-Source: Indian Express

December 2023