In order to enhance market integrity and safeguard the interests of investors, Securities and Exchange Board of India (SEBI) and the Exchanges have introduced various enhanced surveillance measures over time. These measures include reductions in price bands, periodic call auctions, and the transfer of securities to the Trade-to-Trade segment.

What is the Graded Surveillance Measure (GSM)?

The Graded Surveillance Measure (GSM) is a framework designed to monitor and curb excessive speculation in the stock market. It consists of multiple stages, each with progressively stringent actions to control the volatility and risks associated with certain stocks.

Overview of GSM Stages:

There are six stages of surveillance actions under GSM. Each stage brings in different levels of restrictions aimed at ensuring market stability. 

For more detailed information, you can refer to the NSE list and BSE list of GSM stocks. Additionally, NSE has provided an FAQ document for further clarity on the GSM framework.

Why am I not allowed to trade GSM stage 2 and above stocks?

You will not be able to buy the stocks that are in GSM stage 2 or higher. These stocks require Additional Surveillance Deposit (ASD) of 100% the trade value or more. The ASD margin will remain blocked by the exchange for a period of at least 2 months even after you sell the stock.

Implications of GSM

1. Additional Surveillance Deposit (ASD):  A 100% Additional Surveillance Deposit (ASD) of the trade value is mandated. This deposit is held by the exchange and may not be released until after a specific period, even after the stock is sold. This measure is intended to reduce volatility and discourage speculative trading in these securities.
2. Trading Restrictions: : Fresh purchases of stocks in Stage 2 are generally restricted due to the stringent ASD requirements, making it less attractive for buyers. However, those already holding the stock can continue to hold or sell their shares.
3. Intraday Trading Limitations: Intraday trading is typically not permitted for stocks under Stage 2 GSM. This means that traders cannot use leverage or margin to buy and sell these securities within the same trading day.
4. Impact on Pledged Stocks: : Stocks in Stage 2 cannot be pledged for collateral margins. If you have already pledged such a stock, the collateral value will be reduced, requiring you to either provide additional margins or un-pledge the stock.
5. Corporate Actions: : All corporate actions like dividends, bonus issues, or stock splits will still be honored for stocks under GSM Stage 2. These benefits are passed on to shareholders as usual.
6. Exit Restrictions:  While selling is permitted, the restrictions on buying, combined with the 100% ASD requirement, can make it difficult to find buyers, potentially leading to liquidity issues.
7. Monitoring and Review: The stock continues to be closely monitored by the exchange. Depending on its performance and adherence to regulatory criteria, the stock could either move back to Stage 1, escalate to higher stages, or be removed from the GSM framework.

Stocks Under IBC

In addition to GSM, stocks under the Insolvency and Bankruptcy Code (IBC) are also blocked for trading as per Navia RMS Policy. For a list of stocks falling under IBC, you can refer to the provided link.