Shares excluded from ASM list rally despite overall weakness in the market

Shares of companies that were excluded from the so-called additional surveillance measure (ASM) list rallied on Thursday. Nine out of 13 stocks on which exchanges removed trading restrictions ended with gains despite overall weakness in the market. Shares of Venky's (India) skyrocketed 20 per cent, while that of Tinplate Company of India, Crescent Leasing and Dilip Buildcon gained between seven per cent and 16 per cent. 

Investors have to provide 100 per cent margin while dealing in these stocks. Also, the stocks are subject to a five per cent limit on the share price movement. The stocks are reviewed twice a month to determine if they are in a position to exit the mechanism. The list of companies under ASM is updated on a regular basis by BSE and the National Stock Exchange (NSE).

Shares of several companies put on the ASM list had tumbled amid an unwinding of speculative positions. More than 75 per cent of the 109 stocks put on the initial ASM list had seen an erosion in their stock price in the six weeks after June 1 (day of applicability), an earlier analysis by Business Standard showed. Nearly a third of these stocks had tumbled more than 25 per cent.

"Investors, as well as traders, turn risk-averse towards stocks put on the ASM list. Therefore, there was a relief rally in shares of companies that were removed from the list. The market has started viewing stocks on the ASM list with suspicion," said a broker.

Exchange officials say the ASM list is to curb speculation and not a penal action. 

"It may be noted that the shortlisting of securities under ASM is purely on account of market surveillance and it should not be construed as an adverse action against the concerned company," said an exchange notification. 

Exchanges look at various parameters such as the number of times price band were hit, close-to-close price variation, price to earnings (P/E) ratio and high-low price variation.