Some stocks in the Indian market don’t trade as freely as others — and there’s a reason for that. When prices spike without reason or trading volumes shoot up suspiciously, regulators step in. But these aren’t bans or blacklists. They’re protective measures. SEBI, through tools like ASM and GSM, flags such stocks not to scare investors, but to caution them.

Think of these watchlists as traffic signals. When a stock flashes red or orange, it’s a signal to slow down, reassess, and understand what’s happening. In this blog, we break down why stocks get restricted, what these surveillance frameworks really mean, and how to navigate them smartly as an investor.

Understanding ASM

ASM, or Additional Surveillance Measure, was introduced by SEBI and is enforced by stock exchanges like NSE and BSE. The goal? To watch over stocks that are behaving unusually — whether it’s wild price swings, unusually high volumes, or trading patterns that just don’t add up.

This doesn’t mean the company is a fraud or in trouble. It just means something about its trading activity seems out of the ordinary — and regulators want to make sure it doesn’t spiral into manipulation or mislead retail investors.

Why Are Stocks Put on the ASM List?

There are specific criteria. Some of the key triggers include:

• Sudden price spikes or falls without fundamental backing

• Abnormally high trading volumes

• A few investors accounting for a large chunk of trades

• Unusual returns over a short time window

For example, if a stock trading at Rs 20 suddenly jumps to Rs 60 in two weeks without any major news, it could catch SEBI’s attention and land in the ASM list.

This system isn’t about punishing companies — it’s about slowing down potential speculation.

Types of ASM

ASM comes in two broad types:

• Short-Term ASM: Applied when a stock sees sharp, short bursts of volatility. Think of this as a quick, temporary check.

• Long-Term ASM: For stocks showing persistent suspicious activity over several months. This is a deeper watch.

Each type has stages. The deeper the concern, the stricter the stage. But again, these stages can be reversed if the stock stabilises.

What Happens When a Stock Is Under ASM?

Here’s what might change:

• Higher margin requirements: Traders need to put in more money to buy or sell these stocks.

• Intraday restrictions: No quick in-and-out trades. This reduces speculative frenzy.

• Trade monitoring: Exchanges keep a close watch on who’s trading, how much, and when.

These restrictions are reviewed regularly. If the stock’s behavior improves, the tag is lifted. So it’s not permanent — it’s conditional.

Should You Panic If Your Stock Falls Under ASM?

Not at all. ASM is not a judgment of a company’s business health or future.

If you’re a long-term investor who believes in the company’s fundamentals, ASM shouldn’t shake your conviction. But if you’re in just because of hype or price momentum — this might be a sign to reevaluate your reasons.

Next, Let’s Understand GSM

While ASM watches stocks for volatility, GSM or Graded Surveillance Measure — targets companies with weak fundamentals, especially those where price rises seem entirely disconnected from reality.

In simpler words: if a penny stock with poor financials suddenly becomes a multi-bagger, it’s likely to end up in GSM.

How GSM Works

GSM places stocks into one of six stages. The higher the stage, the tougher the trading restrictions.

Let’s break it down:

• Stage I: Trading allowed only under the “Trade-for-Trade” segment with a 5% price band

• Stage II: Same as above, plus 100% upfront margin — you pay the full value to trade

• Stage III: You can only trade once a week (Monday) + 100% margin

• Stage IV: Same as Stage III, but margin rises to 200%

• Stage V: Trading allowed just once a month (first Monday) + 200% margin

• Stage VI: Same as Stage V, but with no upward movement allowed

These stages act like speed bumps — the aim is to cool down speculation and protect investors from being lured into risky stocks with no real substance behind the price rise.

Can a GSM-Flagged Stock Come Back to Normal?

Yes. Stocks under GSM are reviewed periodically. If their fundamentals improve or speculative trading reduces, they can be moved to a lower stage — eventually even be removed from the GSM list entirely.

That said, not every stock makes that comeback. So due diligence is key.

Why Does GSM Matter to Investors?

Here’s what it means for you:

• Risk Alert: GSM flags stocks where risk is high. If you’re invested or planning to invest, this should make you pause and study the company deeper.

• Transparency: It ensures that small investors don’t fall prey to manipulated rallies.

• Stability: By cooling off overheated stocks, GSM helps prevent broader market distortion.

ASM vs GSM

Feature	ASM	GSM
Triggered by	Unusual trading patterns/volatility	Weak fundamentals + price surge
Focus	Curb speculation	Protect from pump-and-dump
Restrictions	Margins, intraday limits	Trading windows + 100-200% margin
Can exit list?	Yes	Yes
Goal	Market discipline	Investor protection

Bottomline

If a stock you own (or want to buy) is under ASM or GSM, don’t jump to conclusions — but don’t ignore it either.

Start by asking the right questions:

• Is the price justified by the company’s fundamentals?

• Are there news updates or filings that explain the price move?

• Is your investment based on research — or just a tip?

In short, treat ASM and GSM tags as signals to investigate deeper — not automatic sell triggers.

Investing isn’t just about riding momentum — it’s about making informed, rational decisions. ASM and GSM are tools to help you do just that.

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