NSE surveillance actions on eligible stocks are applicable as per transparent rules, which are non-discretionary, pre-announced and automatically applicable, the exchange said in a note on Sunday.
Inclusion or exclusion of stocks under additional surveillance measures (ASM) and other trading activity-based specific rules, like price bands and trade for trade (T2T), are based on parameters which consider price volatility, volumes, market capitalisation, client concentration and liquidity parameters. The exact parameters, along with duration of applicability, have been in public domain and have been applied consistently.
“Common across exchanges, these rules are implemented automatically and no human discretion is allowed. These rules and review periods are also pre-announced to the market. The actions which result out of these pre-announced rules are available in public domain and are applied without discretion to all the stocks which attract the specific clauses of such rules,” the note said.
The NSE recently lifted additional surveillance on some Adani Group stocks, prompting criticism from some quarters and questions on why the Securities and Exchange Board of India (Sebi) was allowing investors to take added exposure to such stocks.
“This entire framework has been time tested. Further, any changes to the said rules are also pre-announced before any future action on basis of new rules becomes applicable. Process audits and periodic inspections are undertaken to ensure compliance with the parameters defined. The actions are applied in an automated way and no exceptions are allowed,” the NSE said.
The exchange said inclusion and exclusion of stocks in Nifty indices on a periodic basis have been as per transparent policies. All Nifty indices are maintained by NSE Indices, a subsidiary of NSE, and are based on index methodologies that are objective, non-discretionary, rules-based, pre- announced and transparent. The index criterion for including any stock into an index or excluding any existing stock from an index is well defined, documented and made available on the NSE and NSE Indices websites.
“The specific methodology for each Nifty index may be different based on the objective of the index and the underlying market that the index seeks to represent. For example, the inclusion of stocks in Nifty 50, India’s flagship index, is based on free-float market capitalisation, impact cost, trading frequency, and availability of a stock for trading in the F&O segment of the exchange,” the NSE said.