If you actively track stocks or follow market news, you may have come across the term ASM in the stock market. Many investors panic when a stock is placed under ASM, assuming it signals something fundamentally wrong. However, that’s not always true.
ASM, or Additional Surveillance Measure, is a regulatory framework introduced by stock exchanges to protect investors and maintain market stability. Understanding ASM is essential for anyone serious about investing and learning key financial terms for investors.
In this guide, we explain what ASM means, why stocks are put under ASM, how it impacts trading, and what investors should do when a stock enters ASM.
What Is ASM in the Stock Market?
ASM in the stock market stands for Additional Surveillance Measure. It is a mechanism introduced by Indian stock exchanges – NSE and BSE – to monitor stocks that show abnormal price movements, excessive volatility, or unusual trading volumes.
The primary objective of ASM is:
- To alert investors
- To discourage speculative trading
- To enhance market integrity
ASM does not indicate fraud or poor fundamentals. It is purely a preventive and risk-control measure.
Why Was ASM Introduced?
The stock market occasionally witnesses:
- Sudden price spikes without news
- Sharp declines driven by speculation
- Circular trading or excessive leverage
To curb these risks and safeguard retail investors, exchanges introduced ASM as a surveillance tool rather than a punitive action.
From an investment advisory perspective, ASM helps ensure that investors make informed decisions rather than emotional or momentum-driven trades.
Key Objectives of ASM in Stock Market
The core objectives of ASM include:
- Monitoring abnormal price and volume movements
- Warning investors about higher risk stocks
- Reducing excessive speculation
- Maintaining orderly market behavior
- Enhancing transparency and investor protection
Criteria for Stocks to Be Put Under ASM
Stocks may be placed under ASM based on:
- Sharp price increase or fall in a short period
- High volatility compared to peers
- Unusual trading volumes
- Market-wide surveillance alerts
- Sector-specific speculative trends
These parameters are reviewed periodically by the exchanges.
ASM Stages Explained
Stocks under ASM are categorized into different stages, depending on the level of risk observed.
Stage I
- Surveillance alert only
- No trading restrictions
- Acts as an early warning to investors
Stage II
- 100% margin requirement
- No intraday leverage allowed
Stage III
- Trade-to-trade settlement
Mandatory delivery
Higher margin requirements
Stage IV
- Continued trade-to-trade
- Stricter surveillance
- Very limited speculation
Each stage aims to progressively reduce risk.
What Happens When a Stock Enters ASM?
When a stock enters ASM:
- Margin requirements increase
- Intraday trading may be restricted
- Volatility may reduce
- Liquidity may temporarily decline
However, long-term investors with strong conviction are usually less impacted than short-term traders.
ASM vs GSM: What’s the Difference?
| Feature | ASM | GSM |
| Full Form | Additional Surveillance Measure | Graded Surveillance Measure |
| Focus | Abnormal price/volume movement | Poor financials or governance concerns |
| Nature | Preventive | More restrictive |
| Impact | Gradual restrictions | Strong trading limitations |
Understanding this difference is important when evaluating risk as part of a broader investment advisory strategy.
Is ASM Good or Bad for Investors?
ASM is neither good nor bad by default.
For short-term traders:
- ASM can limit leverage and quick exits
For long-term investors:
- ASM improves market discipline
- Reduces manipulation risks
- Encourages fundamental investing
Experienced advisors view ASM as a risk-management framework, not a red flag.
Should You Buy a Stock Under ASM?
Buying a stock under ASM depends on:
- Business fundamentals
- Earnings growth
- Valuation
- Long-term outlook
- Your risk appetite
A stock under ASM with strong fundamentals can still be a valid long-term investment. This is where professional investment advisory guidance becomes valuable.
How Long Does a Stock Stay Under ASM?
There is no fixed timeline. Stocks are reviewed periodically and may:
- Move to a higher stage
- Move to a lower stage
- Exit ASM completely
Once volatility normalizes, the stock can be removed from ASM.
How to Check ASM Stocks?
You can check ASM-listed stocks on:
- NSE official website
- BSE official website
- Exchange circulars and notices
Staying updated helps investors manage risk effectively.
Impact of ASM on Liquidity and Volatility
ASM generally leads to:
- Reduced speculation
- Lower intraday volatility
- More stable price discovery
While short-term liquidity may reduce, long-term market quality improves.
Role of Investment Advisory in ASM Stocks
A professional investment advisory helps investors:
- Understand the real reason behind ASM inclusion
- Separate fundamentals from speculation
- Align investments with long-term goals
- Avoid panic selling or emotional buying
ASM should always be evaluated in the context of business quality, not just price action.
Why ASM Is an Important Financial Term for Investors
ASM is among the most important financial terms for investors because it:
- Directly impacts trading behavior
- Influences margin requirements
- Signals increased risk awareness
- Helps investors stay disciplined
Every serious investor should understand how ASM works.
Common Myths About ASM in Stock Market
- ASM means the company is fraudulent – False
- ASM stocks always fall – False
- ASM is permanent – False
- Long-term investing is impossible in ASM stocks – False
Conclusion: Understanding ASM in Stock Market
ASM in the stock market is a protective mechanism, not a punishment. It promotes transparency, reduces speculation, and safeguards investors from sudden market shocks.
For investors focused on long-term wealth creation, understanding ASM – along with other financial terms for investors – is essential. With the right analysis and investment advisory support, ASM stocks can be evaluated rationally and confidently.
FAQs on ASM in Stock Market
1. What is ASM in the stock market?
ASM stands for Additional Surveillance Measure used by exchanges to monitor high-risk stocks.
2. Why do stocks come under ASM?
Due to abnormal price movements, high volatility, or unusual trading volumes.
3. Is ASM a negative sign?
No, it is a preventive surveillance measure, not a sign of weak fundamentals.
4. Can I buy ASM stocks?
Yes, subject to higher margin and delivery requirements.
5. Does ASM affect long-term investors?
Minimal impact if fundamentals are strong.
6. Is intraday trading allowed in ASM stocks?
It depends on the ASM stage.
7. What is trade-to-trade in ASM?
Mandatory delivery-based trading with no intraday selling.
8. Who decides ASM inclusion?
NSE and BSE surveillance committees.
9. How often is ASM reviewed?
Periodically by the exchanges.
10. Can a stock exit ASM?
Yes, once volatility normalizes.
11. Is ASM the same as GSM?
No, GSM is more stringent and based on governance and financial risks.
12. Does ASM impact stock price?
It may reduce volatility and speculative price movements.
13. Where can I check ASM stock lists?
On NSE and BSE official websites.
14. Is ASM applicable to all stocks?
Yes, including large-cap, mid-cap, and small-cap stocks.
15. Does ASM mean poor company performance?
Not necessarily.
16. Should beginners avoid ASM stocks?
Beginners should invest cautiously and understand the risks.
17. Can mutual funds invest in ASM stocks?
Yes, subject to internal risk guidelines.
18. Is ASM permanent?
No, it is temporary.
19. Does ASM increase margin requirements?
Yes, margins usually increase significantly.
20. How can an investment advisory help with ASM stocks?
By providing fundamental analysis, risk assessment, and long-term strategy.
Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.
Jaspreet Singh Arora is the Chief Investment Officer at Equentis, where he heads a seasoned team of equity analysts and turns two decades of market experience into portfolios that consistently beat the benchmark. A go-to voice on cement, building-materials, real-estate, and construction stocks, Jaspreet previously ran research desks at leading brokerages, honing an eye for the metrics that truly move share prices. His plain-spoken analysis helps investors cut through noise and act with conviction. When he’s not deep-diving into earnings calls, you’ll find him unwinding over sports, weekend cricket or a good history podcast.
