To keep a closer watch on small-cap stocks and protect investors, NSE has updated its Enhanced Surveillance Measure (ESM) framework, which kicks in from July 28, 2025. The new rules apply to companies with a market cap below ₹1,000 crore and focus on tightening the criteria for tracking unusual price movements.
1. Shortlisting Criteria for ESM Stage 1:
A stock will be shortlisted if either of the following is met:
1.1 High–Low Price Variation (over 3/6/12 months):
Variation exceeds 1 standard deviation of peers (with m-cap < ₹1000 Cr)
AND absolute variation > 75% (3 Months), 100% (6 Months), 150% (12 Months)
AND positive close-to-close price change in last 3 months.
1.2 Close–to–Close Price Variation (over 3/6/12 months):
Variation exceeds 1 standard deviation
AND absolute change > 50% (3M), 75% (6M), 100% (12M)
1.3 Exclusion: Stocks with derivative are exempt.
2. Stage-Wise Surveillance Actions:
Stage I (Post Shortlisting as per above):
- 100% margin from T+2
- Trade-for-Trade settlement with price band of 5% (or 2% if already applicable)
Stocks already under Stage I will be moved to Stage II if they meet the following:
Either the stock’s close-to-close price rises by 15% or more over any 5 consecutive trading days,
Or the price increases by 30% or more in a month,
AND the stock’s P/E ratio is either zero or more than twice the P/E of the Nifty 500 index.
Action Taken:
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Trading will shift to Trade-for-Trade with a 2% price band
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100% margin will be required
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Trading allowed only through Periodic Call Auction with a ±2% price band every day.
3. Review and Exit Process:
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Stocks under the ESM framework will be reviewed weekly for possible downgrade to a lower stage or exit.
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A stock can exit the ESM framework after 90 days, provided it no longer meets the entry criteria.
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However, if the stock is in Stage II, it must stay there for at least 1 month. After 1 month, if its monthly price gain is less than 15%, it can be downgraded to Stage I during the weekly review.
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After completing 90 days in the framework (and meeting the above conditions), the stock becomes eligible to exit the ESM framework.
Note: Once a stock exits the ESM framework, its original price band will be brought back. However, if the stock is under any other surveillance measure, then the price band of that measure will apply instead.
Link to NSE’s circular: https://nsearchives.nseindia.com/content/circulars/SURV69315.pdf