ASM Stocks: Should You Press The Panic Button?

Additional Surveillance Mechanism (ASM) is just an additional step launched by SEBI in order to minimise damage to investors who have invested in those securities that show signs of abnormal volatility and hence may be vulnerable to manipulation. Geyatee Deshpande explains in detail the logic behind the ASM list of stocks while pointing out that there is no need to press the panic button just because their favourite stocks feature on the ASM list

- Geyatee Deshpande

Ideally speaking, a rational investor should aim to park risk capital in quality stocks that are growth-oriented or can generate cash flows in the form of dividends. There are various parameters and definitions of what a ‘quality stock’ is. Most intelligent and disciplined investors do manage to identify quality stocks and invest in them for the long term to generate decent returns. However, a majority of investors struggle to identify quality stocks in the first place and many of them do end up holding poor quality stocks in the portfolio. Some retail investors in pursuit of high returns end up buying volatile stocks that may not be high in quality.

Often enough, investors may have noticed that several high volatility stocks feature on the Additional Surveillance Mechanism (ASM) list. Once the stock features on the ASM list, it is seen that an investor gets a little nervous and may take a decision that could prove to be unprofitable. Talking about such an experience, Amol Lad, a retail investor, says, “I bought CG Power at ₹12 per share, and to my surprise, the stock doubled within one month to trade at ₹24 per share. One day I just wanted to check the stock price on the bourses and I realised the stock was featuring on the ASM list.”