The National Stock Exchange (NSE) on Thursday (February 2) placed Adani Enterprises, Adani Ports, and Ambuja Cements under the additional surveillance mechanism (ASM), Reuters reported. This means trading in their shares will require a 100% margin, which is aimed at curbing speculation and shortselling.
The move comes as shares of Adani group companies continue to fall in the wake of accusations of stock manipulation and fraud levelled against the group by New York-based short seller Hindenburg Research.
What is additional surveillance mechanism (ASM)?
The ASM was introduced on March 26, 2018 with the intention to protect investors from market volatility and unusual changes in share price. According to the National Stock Exchange (NSE) website, “In continuation to various surveillance measures already implemented, SEBI and Exchanges, pursuant to discussions in joint surveillance meetings, have decided that along with the aforesaid measures there shall be Additional Surveillance Measures (ASM) on securities with surveillance concerns based on objective parameters viz. Price / Volume variation, Volatility etc.”
The shortlisting of securities for placing in ASM is based on criteria that are jointly decided by the Securities and Exchange Board of India (SEBI) and exchanges, covering the parameters of “high low variation, client concentration, PE, close to close price variation, market capitalisation, volume variation, delivery percentage, and number of unique PANs”, the NSE FAQs say.
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Put simply, an ASM shortlisting signals to investors that the stocks have seen unusual activity. 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 / entity,” the FAQs say.
SEBI has not announced any probe into the Adani shares crash so far.
How much have Adani stocks fallen?
According to a report by the AP, Adani company shares are still losing value. Shares in Adani Enterprises fell 27% on Thursday, while six other Adani companies fell 5%-10%. The cumulative rout in a week is now close to $108 billion — one of the biggest wipeouts in India’s history.
Gautam Adani’s personal fortune sank to $72 billion from $120 billion before the Hindenburg Research report came out, according to Bloomberg’s Billionaire Index.
On Wednesday, the Adani Group called off its Rs 20,000 crore follow-on public offer (FPO) and announced it would return the money to investors. This means the Group will no longer have the funds it had launched the FPO to raise.
What has the RBI said?
The Reserve Bank of India (RBI) on Thursday sought details from banks about their exposure to Adani group companies amid the sustained fall in the shares of group companies and the withdrawal of the follow-on public offer of Rs 20,000 crore.
When contacted, an RBI official declined to comment on the development. After Credit Suisse stopped accepting bonds of Adani Group companies as collateral for margin loans to its private banking clients, Citigroup’s wealth unit has stopped extending margin loans to its clients against securities of Adani group companies. “This might have prompted the regulator to step in,” said a banking source.