The National Stock Exchange will place short-term surveillance on three shares of the Adani Group even as the Adani Group gained ground in the stock market following the acquisition of shares by US-based GQG Partners. This has been clarified in the circular issued by NSE. Shares of Adani Enterprises, Adani Power Limited and Adani Wilmar remain under additional surveillance by NSE’s Short Term Additional Surveillance Mechanism (ASM). The NSE had brought Adani Ports and Ambuja Cements Ltd under the ASM framework along with Adani Enterprises on 3rd of last month, but Adani Ports and Ambuja Cements Ltd were removed from monitoring on 10th February and Adani Enterprises on 7th of this month. Moreover, Adani Group’s flagship company was under surveillance imposed by stock exchanges for a month.
The surveillance was instituted in the context of abnormal selling of shares of companies belonging to the Adani group. NSE has informed that monitoring of three companies will continue. Exchanges make such moves to protect investors from speculative or other forms of illegal trading. In cases where stocks exhibit volatility they are moved into the short-long-term ASM framework.
Shares of Adani Group’s ten listed companies have performed well in the last six trading sessions. Also there were purchases at low prices from investors. The total market capitalization of Adani group companies was Rs 7 lakh crore earlier this month, and on Wednesday it touched Rs 9 lakh crore. GQG Partners’ large investment in the Adani Group has also prompted domestic investors to buy Adani shares.
Short-term ASM also has two phases. At least 5/15 trading sessions should be maintained at each stage as applicable. Also available for review from 6/16 trading day. At present, a total of 29 companies are under the short-term surveillance of NSE. 88 companies are also under long term observation. Adani Green Energy and New Delhi Television (NDTV) will move from Phase I to Phase II of long-term monitoring from today, an NSE circular said.
ASM is an additional watchdog by SEBI and other stock exchanges to protect investors’ interests and enhance market integrity. Stocks are transferred to ASM category based on certain criteria. In this way the stocks under NSE are classified in two ways. Long term and short term. Further monitoring of securities covered under ASM and transfer to trade-to-trade (T2T) category after ensuring compliance with norms. Stocks found to be highly speculative or price manipulated are moved to the trade-to-trade (T2T) category.
The main problem is that if the shares of any of the companies come under ASM’s supervision, the purchase and sale of shares is possible only if an amount commensurate with the transaction value of the shares is tied up. Also if the stock is bought on trade-to-trade (T2T) and the client tries to sell the shares on the same day, the order will be rejected. Similarly stocks under ASM category cannot be pledged. There is also the problem that collateral margins are not available if a pledged stock falls under ASM. Stocks should not be pledged or pledged till they are removed from the ASM. While this will not affect the corporate activities of the company under ASM. The benefits of corporate actions like dividend, bonus, splits etc., are available to the shareholder even if the stock is under ASM category.
In short, this prevents speculators from taking advantage of falling stocks. This is a helpful measure for the average investor as well as those making large investments.
Adani shares are unlikely to fall further as they are currently under extra scrutiny under the ASM. The Adani Group has seen a sharp rally in its share price after Adani Enterprises, Adani Power and Adani Wilmar came under the National Stock Exchange’s short-term additional surveillance regime. Meanwhile, shares of Adani Enterprises Ltd fell sharply in today’s trade. After six consecutive sessions of gains, the stocks closed higher today. It ended trading at Rs 1,903, down 6.66 percent from yesterday’s close of Rs 2,039.