A surveillance stage is a funding event, not a verdict on the company
The short answer
The Additional Surveillance Measure and the Graded Surveillance Measure are rule-driven exchange actions, not findings about a company. ASM responds to how a security is being traded, measuring price variation, volatility and how concentrated activity is among a small number of clients, and it escalates funding: margin rises until the position must be paid for in full. GSM responds to the gap between price and reported fundamentals, measuring net worth, net fixed assets, market capitalisation and valuation against the benchmark, and it escalates permission: settlement moves to trade for trade, a cash deposit is demanded from the buyer, and in the upper stages dealing is allowed in one session a week. Both are published in advance, reviewed on a cadence and reversible. What catches holders is that the enhanced margin applies to positions already open on the day before the measure takes effect, so a stage change reaches the account as a call for cash with no news attached.
A security appears on a surveillance list and the same sentence appears everywhere within the hour: something must be wrong with the company. Usually nothing has been found, because nothing was looked for. A computation ran against published criteria, one threshold was crossed, and a circular went out naming the security and the stage.
The misreading is expensive in a precise way. A holder who treats the stage change as information about the business spends the week deciding what it means, while the thing that actually changed sits in their own ledger: the margin against the position they already hold has gone up, and it is due before the next open.
Two frameworks, two different questions
The frameworks are not a pair of severity levels on one scale. They were built to catch different situations and they impose different kinds of cost.
ASM looks at the tape. Its criteria are constructed from price variation over defined windows, volatility, volume and, most tellingly, concentration: the share of the combined turnover on both exchanges accounted for by the top twenty five clients over the preceding thirty days. A security can satisfy these criteria while its business is entirely unremarkable, because the criteria never look at the business.
GSM looks at the accounts. Its first criterion combines a net worth at or below ten crore, net fixed assets at or below twenty five crore, and a price to earnings multiple above twice that of the benchmark index or negative. Its second combines a full market capitalisation below twenty five crore with the same valuation test, substituting a price to book comparison where earnings are negative. These are figures the company already published. GSM does not discover anything; it notices a combination.
A third framework, the Enhanced Surveillance Measure, sits alongside them for the small end of the market and escalates to a periodic call auction with a narrow band. A security can be on more than one list at once.
Nobody formed a view about the business
Four properties separate these measures from anything resembling a penalty, and each is checkable.
They are rule driven. The criteria are arithmetic, published, and applied by computation, so no discretion is exercised over an individual security and there is no view to communicate.
They are published in advance. The criteria are public before any security meets them, and the stage change is announced by circular with a stated effective date.
They are reviewed on a cadence. A stage is a current state, re-examined on a fixed cycle against the same criteria that produced it.
They are reversible. Securities leave, usually by stepping down a stage at a review, and the exit path is part of the design rather than an exception to it.
None of that describes an enforcement action, which is directed at conduct, is specific to an entity, and does not expire on a quarterly cycle.
The Additional Surveillance Measure, and where margin stops rising
ASM runs in two families. The short term framework has two stages and responds to recent behaviour. The long term framework has four stages and responds to sustained variation over three hundred and sixty five trading days, measured against a benchmark-adjusted threshold rather than a flat percentage.
Short term Stage I collects a minimum of fifty percent margin, or the existing rate where that is already higher, capped at one hundred percent. Short term Stage II collects one hundred percent. All four long term stages collect one hundred percent.
That ceiling is the mechanism worth understanding. One hundred percent margin in the cash segment means the position is paid for in full on the day it is taken, which is the definition of no leverage. No further stage can make it more expensive to fund, because there is nothing left to fund. Escalation past that point takes a different form: the daily price band narrows, and at long term Stage IV the security moves to trade for trade with a five percent band, which removes netting too.
| Stage | Margin collected | What else changes | Intraday leverage in the cash segment |
|---|---|---|---|
| Short term, Stage I | 50 percent minimum, or the existing rate if higher, capped at 100 percent | Nothing else | Sharply reduced |
| Short term, Stage II | 100 percent | Nothing else | None |
| Long term, Stage I | 100 percent | Nothing else | None |
| Long term, Stage II | 100 percent | Price band narrowed | None |
| Long term, Stage III | 100 percent | Price band narrowed further | None |
| Long term, Stage IV | 100 percent | Five percent band and trade for trade settlement | None, and no netting either |
Two of the strongest criteria are about who traded rather than how far the price moved: concentration among the top twenty five clients, and the number of distinct accounts active in the security. A run carried by a wide population is treated differently from an identical run carried by a handful. The framework is looking for thin participation behind a large move.
The Graded Surveillance Measure, and what it withdraws
GSM escalates permission rather than funding, and it does so in four steps.
Stage I applies full margin and a reduced price band while leaving settlement alone, so the security still trades every session and positions still net. Stage II is the break: the security moves to trade for trade, so every purchase is paid for in full and taken to delivery and every sale is delivered from the demat account. Intraday trading ends there, without any rule naming it, because the netting that made it possible has been withdrawn.
Stage III adds a calendar restriction: dealing is permitted in one session a week. Stage IV keeps that and adds the condition that no upward price movement is permitted, so the price can fall within the band but cannot rise.
| Stage | Settlement | When you may deal | Buyer deposit | Price movement |
|---|---|---|---|---|
| Stage I | Normal, netting available | Every session | None | Reduced band, full margin |
| Stage II | Trade for trade | Every session | 50 percent of trade value | Band as applicable |
| Stage III | Trade for trade | One session a week | 100 percent of trade value | Band as applicable |
| Stage IV | Trade for trade | One session a week | 100 percent of trade value | No upward movement permitted |
The deposit is a cost of entry, and it does not come back on a sale
The Additional Surveillance Deposit is the least understood element of the framework and the one with the sharpest edge. It is collected in cash from the buyer, through the buying trading member, on top of the full purchase price, and selling the shares does not release it.
Work the arithmetic at a stage carrying a deposit of one hundred percent of trade value. A purchase of one lakh requires one lakh to settle the trade and one lakh more for the deposit. Two lakh of cash leaves the account to acquire one lakh of stock, and only the first lakh is represented by anything you own.
The design intent is visible in who pays. The deposit falls on the buyer alone, never on the seller. It taxes entering rather than exiting, exactly the asymmetry you would build to stop new money arriving into a security whose price has detached from its accounts while leaving existing holders able to leave.
The funding call that arrives with no news
An exchange circular placing securities under short term ASM does not only govern positions taken after it, and this is the part almost every description omits. The operative sentence directs that the enhanced margin be collected on all open positions as at the day before the effective date, and on new positions from the effective date. A circular published on a Monday evening can name an effective date of Wednesday, with margin on existing holdings due against Tuesday's close.
| Before inclusion | Stage I, 50 percent | Stage II, 100 percent | |
|---|---|---|---|
| Position value | 5,00,000 | 5,00,000 | 5,00,000 |
| Margin rate applied | 20 percent | 50 percent | 100 percent |
| Margin required | 1,00,000 | 2,50,000 | 5,00,000 |
| Collateral already posted | 1,00,000 | 1,00,000 | 1,00,000 |
| Shortfall due before the open | Nil | 1,50,000 | 4,00,000 |
| Change in the price | None. The rate changed, not the position and not the market. | ||
A shortfall is not a private matter between trader and broker. It is reported under the margin collection regime, it attracts a penalty, and that cost is passed through. Many Indian brokers resolve a shortfall by squaring off the position rather than carrying it, which converts a surveillance measure into a forced exit.
Now assemble the second-order effect, because it produces the price move everyone then cites as proof that something was wrong with the company. A stage change narrows the price band, in the upper stages removes the ability to net, and demands cash from every leveraged holder on the same morning. Supply arrives from holders who must raise the money, while the population able to buy has just been thinned by the funding requirement and, at the higher GSM stages, by a deposit that doubles the cash cost of entering. That is a liquidity event constructed by the measure itself. The price falls, and the fall is read as confirmation of a problem that was never alleged.
Where the rule lives, and who actually moves a security
A common shorthand has the regulator placing securities in ASM. It does not. The exchanges do, jointly and in consultation with SEBI, through joint surveillance meetings, and the exchanges publish the lists.
SEBI's consolidated position now sits in one place. The Master Circular on Surveillance of Securities Market, reference HO/43/15/12(3)2025-ISD-POD2/I/11734/2026 and dated 15 May 2026, supersedes the version of 23 September 2024 and pulls the periodic call auction framework, GSM, ESM, long term and short term ASM, trade for trade, promoter pledge monitoring and trading member surveillance into a single document. It was first issued on 23 March 2023, and each reissue folds in the directions accumulated since.
Knowing what that document is prevents a wasted afternoon. The master circular is the architecture: which frameworks exist, what each is for, and the obligations that attach. Which securities are in which stage today, and what rate applies from which date, live in the exchange circulars instead.
One substantive change is worth checking any older page against. Public sector undertakings were previously outside the GSM and ESM frameworks, and that exclusion was removed following the joint surveillance meeting of 20 September 2024. Many pages still assert the exemption.
| Framework | What it measures | Review | Where the operative record sits |
|---|---|---|---|
| Short term ASM | Recent price and volume behaviour, client concentration | Short cycle, measured in trading days | Exchange surveillance circulars naming securities and effective dates |
| Long term ASM | Sustained variation over 365 trading days with concentration tests | Periodic, minimum stay of 90 calendar days | Exchange surveillance pages and stage-change circulars |
| GSM | Net worth, net fixed assets, market capitalisation, valuation against the benchmark | Quarterly identification and review | Exchange surveillance pages and stage-change notices |
| SEBI master circular | The architecture of all of the above, not the current lists | Reissued as directions accumulate, most recently 15 May 2026 | The regulator's legal section, under master circulars |
Entry is fast, exit is deliberately slow
The two directions are not symmetrical, and the asymmetry is designed. Entry can happen on a single review against a single criterion, with two days between the circular and the effective date. Exit requires a minimum period served. Long term ASM carries a minimum of ninety calendar days, and the exit runs through the stages rather than out of the framework. GSM identification and review run quarterly, and a security that has ceased to meet the criteria typically steps down one stage at a review.
A framework that released a security as fast as it captured one would be trivially gameable: suppress the measured behaviour for one review window and walk out.
The practical consequence is that the constraint outlives the condition that caused it. A security whose price variation normalised in June may still carry full margin in September, so position sizing has to assume the funding requirement persists for months.
A price band and a surveillance stage are different instruments
Both constrain and both are set by the exchanges, which is why they get confused, but they are not the same instrument. A circuit limit is a per-session ceiling and floor on how far a price may travel before dealing halts or the band is revised. It constrains the price and says nothing about who may deal, on what terms, or with how much borrowed money. How those limits are set and revised is covered in the guide on circuit limits in India.
A surveillance stage constrains the terms of dealing instead: what must be paid, whether positions may net, on which days the security may be dealt in at all, and how much cash the exchange holds beyond the purchase price. It reaches the account rather than the chart.
The two interact, which is why they get merged. The upper stages of both frameworks narrow the band as one of their measures, so a security can sit on a five percent band because of a stage move rather than its ordinary classification, and that narrower band is what bounds a forced exit on the morning the margin call lands.
Reading a stage change as a position holder
Read the circular, not the headline. It names the securities, the stage, the effective date and whether the margin applies to open positions. Everything that matters to your account is in those four facts.
Compute the shortfall before the open. Required margin is the new rate applied to the position value, compared against posted collateral.
Treat it as a funding question, not a valuation question. Whether the measure was warranted is not actionable, because no process exists through which an answer arrives.
Check the settlement mode and the band together. Under trade for trade you cannot buy and sell the same security in the same session, and a forced exit into a five percent band is a different event from one into a twenty percent band.
Assume the constraint outlives the trigger, and do not infer a finding. A minimum stay of ninety days is a funding commitment. If the trigger was ASM the criteria were about the tape, and if it was GSM they were ratios drawn from accounts already published.
What the frameworks are actually for
They are friction, applied deliberately and by rule. They do not prohibit, they do not accuse, and they express no opinion about value. They make a security expensive to hold with borrowed money and slow to turn over, which shrinks the population for whom a fast move is worth trading. That is the objective: remove leverage and speed where price has travelled a long way from whatever anchor was available, through a published rule rather than a judgement call defended security by security.
The cost of that approach is the misreading this page exists to correct. A rule cannot explain itself, so people supply an explanation, and it is almost always a story about the company. The defence is unglamorous and entirely within a trader's control: check the surveillance status before taking the position rather than after the circular, size on the assumption that the margin rate can change while you hold, and keep enough unencumbered cash that a rate change is an annoyance rather than an exit.
Frequently asked questions
Does a security entering ASM or GSM mean something is wrong with the company?
No. Neither framework is a finding. A security enters ASM on measured trading behaviour, including price variation and the share of volume taken by the top twenty five clients. It enters GSM on published financial ratios covering net worth, net fixed assets and valuation against the benchmark, all public before the stage change. Nobody examined the business and reached a conclusion. A rule ran and a threshold was crossed.
What is the actual difference between ASM and GSM?
They answer different questions and escalate different things. ASM asks how the security is being traded and escalates funding, raising margin until the position must be paid for in full. GSM asks whether the price is supported by reported fundamentals and escalates permission, moving settlement to trade for trade, demanding a buyer deposit and, in the upper stages, allowing dealing in one session a week.
Can the margin go up on a position I already hold?
Yes, and this is the part most descriptions leave out. The exchange circulars direct that the enhanced rate be collected on all open positions as at the day before the measure takes effect, and on new positions from the effective date. The position you opened last week is inside that sentence.
What happens if I cannot fund the higher margin?
The shortfall is reported and penalised under the margin collection regime, and that cost is passed to the client. Many Indian brokers square off positions carrying a shortfall rather than carry them. The exit then happens in a security whose band has just been narrowed and whose buyer population has just been thinned.
What does trade for trade actually stop me doing?
It withdraws netting. Every purchase must be paid for in full and taken to delivery, and every sale must be delivered from the demat account. You cannot buy and sell the same security in the same session, so intraday trading disappears as a consequence of the settlement change rather than through a separate prohibition.
What is the Additional Surveillance Deposit and does it come back?
It is cash collected from the buyer, through the buying trading member, on top of the full purchase price: fifty percent of trade value from GSM Stage II and one hundred percent at the higher stages. It is retained by the exchange and is not released simply because the shares are later sold. At a one hundred percent stage, buying one lakh of a security requires two lakh of cash on the day.
How long does a security stay under these measures?
Entry is fast and exit is deliberately slow. Long term ASM carries a minimum stay of ninety calendar days and a staged exit. GSM identification and review run quarterly, and a security that has stopped meeting the criteria usually steps down one stage at a review rather than leaving outright. Short term ASM runs on a much shorter cycle.
Where are the lists published and how often do they change?
On the surveillance pages of the exchanges, and in the circulars issued when securities move in, move between stages or move out. The circular names the securities, the stage and the effective date, and is typically published after the close. The lists are the operative record, not any summary of them.
Do these measures apply to the derivatives segment?
The rates described here are cash segment margins and the measures are cash segment measures. A security also available in the derivatives segment can be placed under ASM, and derivative margins are set by their own framework rather than by the surveillance stage. The list published by the exchange is the only reliable answer on any given day.
Are public sector undertakings outside the GSM framework?
Not any more. They were previously outside the GSM and Enhanced Surveillance Measure frameworks, and that exclusion was removed following the joint surveillance meeting of 20 September 2024, a position carried into SEBI's consolidated master circular. Any page still stating that public sector undertakings are exempt describes the position before that date.
Stated as at 19 September 2026. These frameworks are operated by the exchanges in consultation with the regulator and their parameters are revised by circular, so stage definitions, margin rates, deposit percentages and inclusion criteria can change without notice to any secondary source. The current list of securities and the rate applying to each is published by the exchanges and is the only operative record. Read the circular itself rather than a summary of it, verify the position for the security and the date you are dealing with, and take advice on your own facts. Rupee figures in the worked example are illustrative.
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