NSE responds to Adani group stocks row: surveillance measures based on transparent rules and automated decision-making processes

The National Stock Exchange (NSE) has clarified that its surveillance actions and index rejig mechanisms are transparent and non-discretionary as per established rules

Amidst questions over its decision to remove Adani Enterprises and other group stocks from its short-term additional surveillance framework, the National Stock Exchange (NSE) has clarified that its surveillance actions and index rejig mechanisms are transparent and non-discretionary as per established rules. The NSE stated that there is no human discretion involved in its decisions and that the surveillance actions on eligible stocks are based on transparent rules that are pre-announced and automatically applicable.

The move to place Adani group stocks under surveillance followed a report by US-based short seller Hindenburg, which raised concerns about short selling and speculative trades. In February 2021, the NSE put Adani Enterprises, Ambuja Cements, and Adani Ports and Special Economic Zone in the surveillance framework. While Ambuja Cements and Adani Ports were removed from the framework last month, surveillance measures on Adani Enterprises were lifted earlier this month.

According to the NSE, the inclusion or exclusion of stocks under Additional Surveillance Measures (ASM) and other trading activity based on specific rules such as price bands, trade for trade (T2T), etc., are based on parameters that consider price volatility, volumes, market capitalisation, client concentration, liquidity parameters, and others. The NSE clarified that these rules are implemented automatically and are pre-announced to the market, with the resulting actions being available in the public domain and applied without discretion to all stocks that attract the specific clauses of such rules.

Regarding the inclusion and exclusion of stocks in various Nifty indices, the NSE stated that its policies are transparent, objective, non-discretionary, rules-based, pre-announced, and maintained by NSE Indices, a subsidiary of NSE. The NSE emphasized that the specific methodology for each Nifty index may be different based on the objective of the index and the underlying market that the index seeks to represent. The exchange further stated that once the index criteria has been crystallised, there is no human discretion involved in deciding on the inclusion or exclusion of stocks in any of its indices.