What is ASM

Introduction: Why Investors Must Understand ASM?

Imagine this: you’ve spotted a stock rising 15% every other day. Tempted, you jump in, only to see the same stock crash just as fast. This kind of extreme volatility is why stock exchanges in India introduced ASM (Additional Surveillance Measure).
If you’re wondering “What is ASM in trading?”, or how the ASM framework in the stock market affects your buying and selling, this guide will help. This blog will help you understand ASM trading rules, ASM stages, its impact on liquidity, and what it means for your portfolio.
 

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What is ASM in the Stock Market?

ASM stands for Additional Surveillance Measure. It is a regulatory framework introduced by NSE and BSE to monitor stocks that show unusual price or volume movement.

The goal is simple,

Protect retail investors from speculative trading traps.

Maintain market integrity by discouraging manipulation.

When a stock is placed under ASM, exchanges apply stricter rules, like 100% upfront margin requirement, price band limits, and trade-to-trade settlement.

Why Do Exchanges Put Stocks Under ASM?

A stock is placed under ASM when it shows patterns that could harm investors. Some ASM eligibility criteria include,

High volatility compared to peers.

Sharp price changes without matching fundamentals.

Abnormal trading volumes.

Low free-float market cap that makes manipulation easy.

So, if you’ve asked, “how are stocks selected for ASM?”, these are a few of the factors regulators use.

Stages of ASM in Stock Market

ASM works in two stages,

ASM Stage 1

• 100% margin requirement (no leverage allowed).
• Price movement limits are tightened.
• Stocks may shift to trade-to-trade settlement (every buy must result in delivery).

ASM Stage 2

• Stricter restrictions than Stage 1.
• Tighter circuit filters (like 5%).
• Increased surveillance by exchanges.

This means if you’re looking at a stock in the ASM list of stocks, check whether it’s in Stage 1 or Stage 2, since the rules differ.

Impact of ASM on Stocks

Many traders ask, “Is ASM good or bad?” Here’s the reality:

Benefits:

• Protects investors from pump-and-dump schemes.
• Improves market transparency.
• Reduces speculative excess.

Drawbacks:

• Liquidity drops as intraday and margin trading get blocked.
• Price movement slows due to strict circuit filters.
• Short-term traders may find it unattractive.

If you’re an investor, ASM may frustrate you in the short term but safeguards you in the long term.

ASM vs GSM: What’s the Difference?

Many confuse ASM with GSM (Graded Surveillance Measure).

• ASM: Targets volatility and abnormal trading behaviour.
• GSM: Targets companies with poor fundamentals or weak financials (like penny stocks).

In essence, ASM = volatility control, GSM = weak fundamentals monitoring.

What Happens When a Stock Enters ASM?

When a stock enters the Additional Surveillance Measure (ASM) in the stock market, trading rules become tighter, 100% margin is needed, intraday leverage is blocked, and price bands shrink. These ASM trading restrictions are meant to control volatility, not punish investors. Importantly, ASM isn’t permanent. 

Once a stock stabilises and no longer meets the criteria, it exits ASM. Many shares even rebound strongly after removal, as liquidity returns and confidence improves. So, while ASM feels restrictive, its impact on long-term investors is usually temporary.

ASM Rules for Investors: How to Navigate?

Here’s a simple checklist before trading ASM stocks:

• Check if stock is under ASM, NSE/BSE publish updated lists daily.
• Avoid short-term speculation, intraday trades usually fail due to restrictions.
• Review fundamentals, look at P/E, ROIC, debt ratio. ASM is temporary, but company fundamentals matter long-term.
• Diversify, don’t concentrate your portfolio in ASM-flagged stocks.

Final Thoughts: Should You Worry About ASM?

ASM in the stock market is not a red flag on a company’s fundamentals. It is a surveillance tool to protect retail investors from volatility and speculation.

For traders, it means stricter rules, lower liquidity, and no leverage. For long-term investors, it’s just a temporary safeguard.

So the next time you wonder, “What is ASM and how does it impact my portfolio?”, remember: ASM is a seatbelt, not a speed breaker. It doesn’t stop wealth creation, it just ensures you drive safely in the market.