Fairness Markets Beneath Assault, NSE Clarifies ASM, Nifty Concerning Inclusion And Exclusion
The National Securities Exchange (NSE) on Sunday said that the inclusion and exclusion of stocks from its indices and the so-called additional surveillance measures (ASM) are carried out in accordance with pre-established rules, and not at anyone’s discretion. The exchange’s clarification comes after opposition parties questioned its decision to withdraw three shares of the Adani group from short-term monitoring.
“The NSE’s monitoring activities for eligible shares are applied in accordance with transparent rules. These rules are non-discretionary, announced in advance and applied automatically… Similarly, the inclusion and exclusion of stocks from various Nifty indices on a periodic basis was carried out in accordance with a transparent policy,” the country’s largest stock exchange said in a statement.
Congress and some other opposition parties said last week that the NSE has stripped ASM from some Adani groups in favor of a conglomerate led by Gautam Adani. Congressman Jairam Ramesh said the NSE’s decision to remove Adani Enterprises, Adani Power and Adani Wilmar from the ASM structure put small investors at risk.
“Surely the time is not random? Why does Sebi stand aside when the NSE prefers to protect the interests of the Adani Group rather than hundreds of thousands of small investors? Why does Sebi allow index investors to invest more in Adani Group shares when financial advisors, who are generally able to afford more affluent investors, are advising their clients to avoid investing in Adani Group shares?” The words of the Congress leader are quoted by PTI.
Following the crash triggered by the January 24 Hindenburg Research report against the Adani group, the NSE moved three Adani group companies — Adani Enterprises, Adani Ports and Special Economic Zone, and Ambuja Cements — to Phase 1 of the short-term ASM on February 2. List to curb excessive speculation.
Adani Ports & SEZ and Ambuja Cements were excluded within days, and the NSE announced the exclusion of Adani Enterprises from ASM on March 7th.
“Inclusion or exclusion of stocks from ASM…is based on parameters that take into account price volatility, volumes, market capitalization, customer concentration, liquidity parameters. The exact parameters as well as the duration of applicability were publicly available and applied consistently,” the NSE said in a statement.
The NSE has also come under fire for including Adani Wilmar in the Nifty Next 50 index. Announced in February at the height of the Hindenburg crisis, his inclusion will take effect on March 31.
Since Adani Wilmar has fallen into either the lower or higher circles since the Hindenburg report, the decision to include him in the Nifty Next 50 index raised concerns among passive trackers. If stocks exceed trading limits, index funds find it difficult to rebalance their portfolios, which can lead to tracking errors.
“Once the criteria for an index are determined, NSE Indices or its committees have no authority to make decisions to include or exclude shares from any of its indices,” the NSE said in a statement.