Graded Surveillance Measure

Graded Surveillance Measure is a pre-emptive method of Surveillance introduced by Securities and Exchange Board of India (SEBI) to closely observe the securities which witness an abnormal price rise not commensurate with financial health and fundamentals like company’s Earnings, Book value, fixed assets, Net worth, Price earnings ratio etc. GSM came into force on from 14th March, 2017.

The objectives of Graded Surveillance Measure are:

  • Alert and advise the investors to be extra careful while dealing in these securities and
  • Advise market participants to carry out necessary due diligence while dealing in these securities

Surveillance actions under GSM:

Currently, there are 6 stages of surveillance under GSM where each stage has a pre-defined surveillance action. Stock exchanges monitor the price movement and corresponding criteria before placing the securities in various stages. Following are the 6 stages of GSM:

Stage Surveillance action
1

Transfer to Trade for Trade settlement with price band of 5% or lower as applicable:

In this stage, trade should take place only with settlement. No speculative trade is allowed. Payment clearance and delivery share should mandatorily take place. While doing so, maximum 5% movement in the share price is allowed.

2

Trade for Trade with price band of 5% or lower as applicable and Additional Surveillance Deposit (ASD) of 100% of trade value to be collected from Buyer:

Along with the stage one being implemented, an additional surveillance deposit of 100% of the trade value is collected from the buyer of the share. This amount will be retained for 5 months before starting the refund in a phased manner.

3 Trading permitted once a week (Every Monday) and ASD of 100% of trade value to be Collected from Buyer.
4 Trading permitted once a week (Every Monday) with ASD of 200% of trade value to be collected from Buyer
5 Trading permitted once a month (First Monday of the month) with ASD of 200% of trade value to be collected from Buyer
6 Trading permitted once a month (First Monday of the month) with no upward movement in price of the security with ASD of 200% of trade value to be collected From Buyer.

Details of the securities under GSM are updated on the website of the stock exchanges via below URL

https://www.nseindia.com/invest/content/List_of_securities_shortlisted_under_GSM.csv

Moving the securities out of GSM:

A quarterly review process is held by the stock exchanges based on pre-defined criteria for moving the securities in/out of GSM. After assessing the position of the securities, the applicable securities will be moved back from a higher stage to a lower stage in a sequential manner.

Repayment schedule of Additional Surveillance Deposit (ASD):

ASD collected during various stages of the GSM will be retained for 5 months and will be repaid as per below schedule:

If collected in Repaid on 2nd Monday of
April - 2017 October – 2017
May - 2017 November – 2017
June - 2017 December – 2017
July - 2017 January – 2018
August - 2017 February – 2018
September - 2017 March – 2018
October - 2017 April – 2018

With respect to the securities moving out of the GSM, a separate notice will be given by stock exchanges disclosing the date of release of ASD.