Stock exchanges expand surveillance measure to companies below ₹1,000 crore m-cap

Amid rising concern over small market valuation and volatility, stock exchanges will enhance the enhanced surveillance measure (ESM) framework to companies with market capitalisation of ₹1,000 crore from ₹500 crore from Tuesday.

Last June, stock exchanges introduced ESM to rein-in volatility in small-cap stocks aided by huge fund flow through mutual fund schemes.

Following a joint surveillance meeting with Sebi, BSE and NSE the ESM mechanism will be extended to companies with market capitalization below ₹1,000 crore, said both the exchanges.

Parameters for shortlisting securities under the ESM framework include high-low price variation and close-to-close price variation, it added.

Stocks in the Stage-I of the ESM framework are traded using a trade-to-trade mechanism with a price band of 5 per cent or 2 per cent. For securities in Stage-II, trading will be conducted with a trade-to-trade mechanism within a price band of 2 per cent.

Earlier, stocks under ESM were allowed to trade only once a week through Periodic Call Auction, but this was eased to trade on all days after certain companies moved Securities Appellate Tribunal against this measure as they are paying listing for the whole year.

“From July 24, 2023, exchanges will permit trading on all days with +/- 2 per cent price band. However, the rule of 100 per cent margin remains unchanged,” both the exchanges had said in the circular.