What are Graded Surveillance Measures (GSM) in stock trading?
Graded Surveillance Measures (GSM) are regulatory tools introduced by SEBI and stock exchanges to monitor and restrict trading in stocks that show speculative pricing misaligned with their financial fundamentals. GSM aims to protect retail investors from risky exposures in such stocks.
Why are GSM measures implemented?
GSM is applied to stocks where the price movement appears excessive or inconsistent with core financial metrics such as:
- Earnings
- Book value
- Net worth
- P/E ratio
- Market capitalisation
The purpose is to flag high-risk securities and gradually restrict trading activity to curb speculation.
Understanding the GSM Stages
| Stage | Surveillance Actions |
|---|
| I | 100% margin applicable
Price band of 5% or lower
Intraday/CO/BO not allowed; CNC allowed |
| II | Trade for Trade
Price band of 5% or lower
50% Additional Surveillance Deposit (ASD) by buyer
CNC disabled |
| III | Trade for Trade
Trading permitted only once a week (Monday or first trading day)
100% ASD by buyer |
| IV | Same as Stage III
No upward price movement allowed |
Trading Restrictions
- GSM Stage I: Delivery/CNC is allowed; Intraday/BO/CO orders are restricted
- GSM Stages II, III, IV: All trading types blocked including CNC and Intraday
- Collateral Usage: GSM stocks have a 100% haircut — not eligible for pledging
What If...
| Scenario | Explanation |
|---|
| I try to place an intraday order in a GSM Stage II stock | The order will be rejected due to restrictions. |
| I want to pledge GSM shares for margin | Not allowed due to 100% haircut. |
| I can only trade once a week | Applicable if the stock is in GSM Stage III or IV. |
Last updated: 28 Jun 2025
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