Under attack, NSE clarifies ASM, Nifty inclusion and exclusion stance

The National Stock Exchange (NSE) on Sunday said the inclusion and exclusion of stocks from its indices and the so-called additional surveillance measures (ASM) is done according to predetermined rules, and not as per anyone’s discretion. The clarification from the bourse came after opposition parties questioned its decision to drop three Adani group stocks from short-term surveillance.

“NSE surveillance actions on eligible stocks are applicable as per transparent rules. These rules are non-discretionary, pre-announced and automatically applicable… Similarly, inclusion and exclusion of stocks in various Nifty indices on a periodic basis has been as per transparent policies,” the country’s largest stock exchange said in a release.

Congress and some other opposition parties claimed last week that NSE had lifted ASM from certain Adani group stocks to benefit the Gautam Adani-led conglomerate. Congress MP Jairam Ramesh said NSE’s move to exclude Adani Enterprises, Adani Power and Adani Wilmar from the ASM framework had put small investors at risk.

“Surely the timing is not a coincidence? Why is Sebi standing by as the NSE chooses to protect the Adani Group’s interests rather than that of lakhs of small investors? Why is Sebi allowing index investors to take on additional exposure to Adani Group stocks when financial advisors, who generally wealthier investors can afford, have been advising their clients to avoid investing in Adani Group stocks?” the Congress leader was quoted as saying by the PTI.

Following the crash triggered by the January-24 Hindenburg Research report against the Adani group, NSE, on February 2, had moved three Adani group companies—Adani Enterprises, Adani Ports and Special Economic Zone, and Ambuja Cements—to Short Term ASM Stage 1 List to curb excessive speculation.

Adani Ports & SEZ and Ambuja Cements were removed within days, while the removal of Adani Enterprises from ASM was announced on March 7 by NSE.

“Inclusion or exclusion of stocks under ASM…is based on parameters which consider price volatility, volumes, market capitalisation, client concentration, liquidity parameters. The exact parameters along with duration of applicability have been in public domain and have been applied consistently,” NSE said.

NSE had also come under fire for including Adani Wilmar in the Nifty Next 50 index. Its inclusion, announced in February in the middle of the Hindenburg crisis, will become effective on March 31.

Since Adani Wilmar has been hitting either lower or higher circuits since the Hindenburg report, the move to include it in the Nifty Next 50 index had led to concerns among passive trackers. If a stock hits trading limits, it is difficult for index funds to rebalance their portfolios, which could lead to tracking errors.

“Once the index criteria have been crystallised, NSE Indices or its committees exercise no human discretion in deciding on inclusion or exclusion of stocks in any of its indices,” NSE said in the release.