Hindenburg effect: NSE puts 3 Adani firms under surveillance
The Adani Group’s woes continue to mount as the National Stock Exchange (NSE), Thursday, put Adani Ports, Adani Enterprises, and Ambuja Cements under additional surveillance measure (ASM) framework from February 3 (Friday). This will require 100 precent margin to trade in their shares and will likely curb short selling
The NSE explained the measure on its official website, stating that “Additional Surveillance Measures (ASM) on securities with surveillance concerns based on objective parameters viz. Price / Volume variation, Volatility etc.”
The stock exchange elaborated that the applicable rate of margin shall be 50 percent or existing margin, whichever is higher, subject to maximum rate of margin capped at 100 percent w.e.f. February 6, 2023 on all open positions as on February 3 and new positions created from February 6.
It said that stocks under surveillance shall be retained in Stage-I as applicable for a minimum period of 5 trading days and shall be eligible for review from 6th trading day onwards.
The NSE’s move comes after the conglomerate’s shares continued to nosedive due to the fallout of the damning report by US short seller Hindenburg Research last week.
Adani Group has endured over $100 billion in market losses till Thursday, creating panic about the potential systemic impact this would have over the market in general. On Wednesday, the group called off its Follow-On Public Offering (FPO) returned money to its investors.
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The NSE explained that if derivative contracts in securities end up in the ban list, if they cross 95 percent of the market-wide position limit.
The NSE directed that that all clients/members shall trade in the derivative contracts of the said security only to decrease their positions through offsetting positions, warning that any increase in open positions shall attract appropriate penal and disciplinary action.
The market-wide position limit, set by stock exchanges, is the maximum number of outstanding open positions (buy and sell) in the F&O contracts of a security. If the open interest in a stock crosses 95 percent of the market-wide position limit, its F&O contracts enter the ban period.
During the ban, traders are not allowed to take fresh positions in stocks but can start reducing their positions. The ban rule helps reduce speculation in stocks and curb short selling.
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