What is the ASM/ GSM List and How Does It Affect Stock Investors?

by Siddharth Singh Bhaisora

Published On Aug. 19, 2023

In this article

Market Surveillance plays a crucial role in ensuring the integrity of the markets. The Market Surveillance Division in the Securities and Exchange Board of India (SEBI) was established in 1995 to monitor market activities, identify price volatility, analyze causes, and oversee the surveillance activities of the stock exchanges.

In the rapidly changing world of stock markets, constant vigilance and timely action are paramount. Two crucial tools employed in the Indian stock markets are the Additional Surveillance Measure (ASM) List and the Graded Surveillance Measure (GSM) List.

What is GSM?

GSM, or Graded Surveillance Measure, is a system that monitors unusual price fluctuations or poor financial performance within the securities market. Introduced by SEBI in March 2017, the primary objective of GSM is to alert investors to be extra vigilant when dealing with such securities and to conduct due diligence accordingly.

The GSM list includes companies witnessing abnormal price rise not in line with their financial health or fundamentals. These companies are often characterized as penny stocks and are vulnerable to financial misconduct. Factors for identifying such securities include earnings, book value, fixed assets, net worth, P/E multiple, and more.

What is ASM?

Additional Surveillance Measure or ASM is primarily focused on controlling security volatility. It consists of two main aspects:

  1. Circuit Filter 5%: Restricts price movements to a range of 5%.

  2. 100% Margin on Open Positions: Compulsory 100% margin on stocks, which means margin trading is disabled.

Through these restrictions, ASM aims to discourage speculators and intraday traders from taking heavy positions, thereby stabilizing stocks. The ASM list includes securities currently under surveillance due to concerns such as price variation, volume variation, and volatility. It serves as a warning to investors to exercise caution with these securities. The inclusion of stocks in the ASM list is based on parameters like:

  • High Low volatility

  • Client Concentration

  • Closure to Closure Price Variation

  • Market Capitalization

  • Volume Variation

  • Delivery Percentage

  • Number of Specific PANs

  • PE

How ASM and GSM Work?

How are stocks selected for the GSM list?

Criteria I: These 3 criteria must be met:

  1. Net worth less than or equal to Rs. 10 crores

  2. Net Fixed Assets (Tangible Assets + Capital Work in Progress) less than or equal to Rs. 25 crores

  3. PE greater than 2 times PE of Benchmark Index (Nifty 500) OR a negative PE.

Criteria II: Criteria for inclusion of securities directly under GSM - Stage 1

  1. Full market capitalization less than Rs. 25 crore

  2. PE greater than 2 times PE of Benchmark Index (Nifty 500) or negative PE

  3. P/B (Price to Book) value greater than 2 times the P/B value of Benchmark Index (Nifty 500) OR negative P/B value

How does the GSM List Work? How GSM is calculated?

The securities move through four stages:

  • Stage I: 100% applicable margin rate and a price band of 5% or lower.

  • Stage II: Trade for trade with a 5% or lower price band and Additional Surveillance Deposit (ASD) of 50% of trade value by the Buyers.

  • Stage III: Trading permitted once a week with 100% ASD.

  • Stage IV: Similar to Stage III but with no upward movement.

ASD is collected from buying trading members and is paid in cash. It is over and above existing margins or deposits levied by exchanges.

How are stocks selected for the ASM list?

ASM consists of two main types: Long-term ASM and Short-term ASM. Let's dive into the specific criteria that dictate these categories.

Long-Term ASM List

The Long-Term ASM list contains stocks that fulfill specific conditions related to price variation, client concentration, and more. Here's a breakdown of the four main conditions:

  1. Condition 1: High-Low Price Variation for 3 months greater than or equal to 150% plus Beta of the stock times Nifty 50 Variation, with a concentration of top 25 clients greater than 30%.

  2. Condition 2: Concentration of top 25 clients greater than 30% and Close to close price variation for the last 60 trading days greater than or equal to 100% plus Beta of the stock times Nifty 50 variation.

  3. Condition 3: Close to close price variation for the last 365 days and High-Low Price Variation for 3 months must meet specific criteria, along with a Market Cap above Rs 500 crores, and top client concentration greater than 30%.

  4. Condition 4: Daily volume in a month must be greater than or equal to 10000 shares and more than 500% of the average volume during the last 3 months, with a top client concentration greater than 30%.

Short-Term ASM List

The criteria for the Short-Term ASM list might vary and are usually based on specific market conditions and short-term trends. It categorizes stocks based on certain criteria and applies specific margin rates to them. The stocks are allocated to two stages, Stage 1 and Stage 2, each with different applicable margin rates.

Stage 1:
  • Stocks in this category are given a chance to provide clarification.

  • Information about the stock being added to the Short-Term ASM is displayed on the website to update investors.

  • The applicable margin rate is 1.5 times the existing margin or 40%, whichever is higher.

  • The maximum margin is capped at 100%.

Stage 2:
  • Stocks in this stage have a higher applicable margin rate.

  • The margin rate is 2.5 times the existing margin or 80%, whichever is higher.

  • The maximum margin is capped at 100%.

Not all stocks face the risk of being added to this list. The following exceptions prevent stocks from being added to the ASM list:

  1. PSU's (Public Sector Undertakings)

  2. Securities with derivative products

  3. Stocks under the trade-to-trade segment follow stricter trading regulations and aren't included in the ASM list

How do stocks get out of the ASM/ GSM list?

Stocks that are a part of the ASM/ GSM list are reviewed on a quarterly basis to see if they continue to meet the inclusion Criteria I and II. If stocks don't meet Criteria I and II, then they are removed from the ASM/ GSM list. For analysis and review, the latest available quarterly or annual financial results are considered and every 2 months, stocks can move in and out of the ASM list based on these periodic reviews.

What is the difference between ASM and GSM?

ASM is designed to prevent deceitful price movements, excessive speculation and ultimately control volatility in stocks. We can think of this as - any stock that exhibits abnormal trading patterns/ behaviors and poses a potential risk to investors will be part of the ASM list. Objective is to protect investors from sudden market fluctuations and provide market integrity.

GSM focuses on identifying underperforming securities quickly. Securities are categorized based on their trading behavior, allowing SEBI to alert advisors and investors about potential risks associated with these stocks. The main objective of GSM is to prevent investors from investing in stocks that might not yield favorable returns.

While both ASM and GSM serve the purpose of protecting investors, their approaches differ. ASM focuses on volatility control, while GSM aims to identify and caution against underperforming securities.

Effects of ASM/ GSM on Stock Investors

SEBI's introduction of these measures restricts investing in stocks with deceitful price movement or excessive volatility. Stocks under ASM or GSM are considered red flags, and investing in them is generally discouraged. These restrictions make margin trading unavailable in these stocks and ensure the investor's benefits.

Stocks that are added to the ASM/ GSM list are subjected to stringent regulation. Both ASM and GSM measures have implications for stock investors, and understanding these effects is crucial for making informed investment decisions.

Impact of ASM

Investors should view ASM-listed stocks as potential red flags, signaling higher risk due to abnormal trading patterns or volatility. If a stock falls under the ASM category, certain restrictions are applied to its trading:

  • Intraday Trading: Stocks on the ASM list are subject to restrictions on intraday trading, potentially affecting trading volume.

  • Margin Requirements: Brokers must maintain a 100% margin for ASM-listed stocks, as opposed to the typical 35% to 40%. This effectively eliminates margin trading for these stocks.

  • Circuit Filters: Stocks on the ASM list may have a 5% circuit filter, limiting price fluctuations to maintain stability.

Impact of GSM

GSM mainly serves as an advisory mechanism for investors and advisors:

  • Securities categorized under GSM levels indicate potential underperformance or risk.

  • The system helps advisors and investors steer clear of stocks that might not provide favorable returns.

Bottom Line

Both GSM and ASM lists are established based on specific criteria, including financial health, trading behavior, and other relevant factors. While stocks listed under these measures face more stringent rules, the intention behind their inclusion is to protect investors from potential risks associated with volatile trading or underperforming securities.

To ensure fairness, transparency, and stability in the stock market, regulatory bodies like the Securities and Exchange Board of India (SEBI) introduce various measures. Two of these measures, Additional Surveillance Measure (ASM) and Graded Surveillance Measure (GSM), play a crucial role in safeguarding the interests of investors. While ASM targets volatility and abnormal trading behavior, GSM identifies underperforming securities. Investors should be cautious when dealing with stocks on these lists, as they might involve higher risk and stricter trading restrictions.

Read this interesting article on What is Lower Circuit in Share Market: Buying and Selling Guide. Also check out Top Indicators For Momentum Investing.


1. How are stocks selected for inclusion in the ASM/ GSM lists?

For the GSM list, stocks are selected based on two main criteria: Criteria I and Criteria II, which include factors like net worth, fixed assets, PE, market capitalization, and more. For the ASM list, selection is based on long-term and short-term conditions including price variation, client concentration, volume variation, and more.

2. What criteria are considered when calculating GSM scores?

GSM scores are calculated based on criteria such as net worth, net fixed assets, PE, market capitalization, and P/B value, among others.

3. How often are the ASM/ GSM lists updated?

The GSM list is reviewed quarterly. The ASM list can be reviewed and updated every two months.

4. What trading restrictions are imposed on stocks in the ASM/ GSM lists?

For stocks on the GSM list, restrictions include applicable margin rates, price bands, trading frequency, and Additional Surveillance Deposits (ASD). For stocks on the ASM list, restrictions include a 5% circuit filter, 100% margin on open positions, and limitation of intraday trading.

5. How does the ASM/GSM list affect liquidity in the affected stocks?

The ASM/GSM lists impose trading restrictions that may limit trading volume, leading to a potential decrease in liquidity for the affected stocks.

6. What impact does the ASM/GSM list have on price volatility?

The ASM/GSM lists aim to control and monitor unusual price fluctuations. For instance, ASM restricts price movements to a range of 5%, and GSM imposes various stages of regulation to control price volatility.

7. How does the ASM/GSM list influence investor sentiment?

The ASM/GSM lists act as warnings to investors, signaling higher risk due to abnormal trading patterns or volatility. Being listed under ASM or GSM could deter investors from investing in those stocks, as they are generally considered red flags.

8. Are there any risks associated with investing in stocks on the ASM/GSM lists?

Yes, investing in stocks on the ASM/GSM lists comes with higher risks due to potential abnormal trading behavior, volatility, or underperformance. Investors are encouraged to be extra cautious and to conduct thorough due diligence.

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