Adani Group Stocks are facing an Additional Surveillance Mechanism (ASM) because of the drastic changes in prices since 2019.

Adani Group Stocks are facing an Additional Surveillance Mechanism (ASM) because of the drastic changes in prices since 2019.

Seven Adani Group stocks have caused regulatory surveillance measures at various times since 2019 due to extraordinary price rise and decrease and high promoter pledges, according to data accessible with the stock exchanges. As of February 3, six listed Adani stocks are subject to an additional surveillance mechanism (ASM).

Adani group stocks have taken a significant hit recently because of the Gautam Adani Hindenburg issue. In 12 sessions, the share price of Adani Enterprises fell from $3,442 to $1,955. Adani Green Energy shares dropped from 1917 to 725 per share, Adani Power shares dropped from 275 to 164 per share, and shares of Adani Ports & Special Economic Zone fell from 761 to 595. Shares of ACC have decreased from 2,335 to 1,910 levels.

The share price of Ambuja Cements has also decreased from about 500 to 365 rupees per unit.

Amid a political uproar over the collapse of the Adani Group’s stock, stock market data reveals that in addition to the current slump, the previous strong climb also attracted regulatory scrutiny and increased surveillance.

Following a barrage of allegations from activist short-seller Hindenburg Research, based in the US, including allegations of fraudulent transactions and share price manipulation at the Gautam Adani-led group, Adani group stocks have taken a significant beating on the stock exchanges and lost billions of dollars in market value.

According to the Adani group, it complies with all regulations and disclosure obligations and has denied the accusations as false. However, the opposition has been denouncing it as a huge scam.

Some opposition politicians have criticized the securities and exchange board of India (Sebi), which oversees the stock markets, for its lack of intervention in the case.

The regulating agency SEBI takes safety measures for the investors’ safety like how each investor takes precautions for a risk-free investing experience. The SEBI has established safety measures for the investors’ security, including Additional Surveillance Measures (ASM). Because of this, it’s important for investors to be aware of the safety precautions that are effective for them.

To improve market integrity and protect investors on securities, SEBI and stock exchanges adopted Additional Surveillance Measures or ASM. Controlling security volatility is its main goal.

ASM is very beneficial to investors because SEBI will carefully examine any unexpected price changes in stock. They will be able to control speculative activities and regulate any sort of malpractice.

To handle any excessive volatility in individual shares, Sebi has stated that it is committed to safeguarding the integrity of the stock market and that the required surveillance procedures are in place.

According to information provided by the stock exchanges, seven Adani Group equities have been the subject of regulatory scrutiny at various times since 2019 because of both unexpected price rise and decrease and high promoter pledge. On February 3, 2023, six listed Adani scrips were placed under an additional surveillance mechanism (ASM).

To address the issue of high volatility in some scrips, Sebi and stock exchanges have implemented extra surveillance procedures. The ASM automatically activates whenever there are sudden changes in the individual stock values, whether on the upside or downside.

According to Niranjan Shastri, an associate professor at NMIMS Indore’s SBM (School of Business Management), the ASM framework was first implemented in 2018 after Sebi and exchanges decided that surveillance was necessary for addition to already-in-place measures. The shortlisting process for the ASM can take place even if markets are moving upward because price variation—both downward and upward—is one of the parameters.

In a statement, Sebi said that it had created several transparent, approachable surveillance tools to control excessive volatility in specific equities (including the ASM framework). Maintaining the market’s effective and disciplined functioning is Sebi’s goal.

It also stated that “this system gets automatically triggered” under particular stock price volatility situations. Three Adani Group companies, Adani Enterprises, Adani Ports and Special Economic Zone, and Ambuja Cements, have been added to the short-term supplemental surveillance program of the stock exchanges BSE and NSE to curtail speculation and short-selling in these securities.

Contrary to popular belief, the recent decline in the price of Adani stock did not start the ASM; rather, a few years ago, the increase in the price of these stocks did.

The ASM measures include increased upfront profits (even up to 100%), a narrower pricing band, settlement on a gross basis rather than a regular net basis, and more. Broker: “These actions send a message to investors that such scrips are riskier and investors should take that into account when making their investment selections.”

According to a broker, brokers inform investors of the need for greater margins, and as a result, investors are made aware of the ASM in the scrips of Adani Group because there would have been higher margin calls.

The ASM is one of many risk management instruments that exchanges have, according to Bhavik Thakkar, CEO of Abans Investment Managers Pvt Ltd, to monitor unusual up or down movement in stock prices.

The exchange can adjust the margins needed to trade a stock once it is included in the ASM, deterring excessive trading. He said that stocks in ASM cannot be pledged in order to get further cash leverage such as a loan against assets or even the normal broker-extended margin funding.

Five equities from the Adani Group are included in the cash segment. For 520 of these days, or 43% of the entire 1,208 days since it was first placed under the extra surveillance mechanism, Adani Green Energy Ltd. was subject to ASM restrictions.

Out of these 520 days, the stock was under strict watch for 475 of them (91%) due to price growth and experienced up to 100% margin, a narrowing of the price band, and trade-for-trade settlement. Since it first came under enhanced monitoring, Adani Power has been subject to short-term or long-term ASM for a total of 511 days out of 780. Of these, one was subject to strict action for a price increase of 267 days.

Out of 1,618 days since first being under surveillance for a price increase, Adani Transmission was under short-term or long-term ASM for 508 days, including 166 days of strict action. Since first being shortlisted under ASM, Adani Total Gas has been under short-term or long-term ASM for 493 of the total 774 days.

Due to the price increase, it was under strict action for 132 days. Adani Wilmar was listed on February 8 of last year, and out of the 281 days since it was first placed under ASM, 151 days (or 54% of those days) saw it placed under extended surveillance, including strict review because of a price increase.

Adani Group has two stocks that are both cash-based and in the F&O sector, where long-term ASM is not applicable. However, because of significant promoter share pledges, short-term ASM and other surveillance procedures are applied to stocks in the F&O segment.

Shares of the Adani Group were discussed in the following way by Avinash Gorakshkar, Head of Research at Profitmart Securities: Dalal Street’s opinion of Adani stocks has changed, and it will take time for it to change, as a result of a US-based short seller raising concerns about the debt positions of the Adani group companies.

He added, the government is expected to emphasize infrastructure, which would have a beneficial ripple impact on a number of associated businesses, including cement production, manufacturing, and of course infrastructure firms. As a result, the budget for 2023 will be key. These improvements are projected to be advantageous for Adani group firms as well, considering the majority of their business is in the infrastructure sector. Any substantial announcement in the budget will therefore increase the value of Adani Group equities in the short to long term.

Following its founders’ prepayment of some debt and traders’ covering of short positions, Adani Enterprises Ltd. jumped and set the pace for increases in the majority of the Indian conglomerate’s stocks.

The shares of the flagship increased by as much as 25% before closing up over 15% in Mumbai. Since US-based Hindenburg Research published the study claiming market manipulation and accounting fraud—claims that Adani has repeatedly denied—that helped stem the decline in the group’s market capitalization to US$115 billion.

edited and proofread by nikita sharma