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BankingNABARD / RBI

SEBI Revamped ESM Framework for Small-Cap Stocks

31 July 20251 min read
BANKING & FINANCESEBI RevampedESM Frameworkfor Small-CapStocks31 July 2025safalsetu.com

Why in the news

SEBI tightened surveillance of small caps to curb speculation and shield retail investors.

Key facts

StageEntryRestrictions
1Positive 3-month price trend plus high-low variation100% margin, trade-for-trade, 5% price band from T+2
2Stage 1 plus negative PE or PE above 2x Nifty 500Tougher steps for volatile, doubtfully valued firms
  • Existing 2% price band stocks keep it.
  • 28 companies now under ESM benefit.

Impact

  • Short-term dip in liquidity and momentum rallies; long-term transparency and investor protection.

Exam angle

  • Mechanism: Enhanced Surveillance Mechanism (ESM).

Test yourself

1. From which date did SEBI's revamped ESM framework take effect?

The notes say the framework was effective 29 July 2025.

2. In SEBI's revised ESM, a Stage 2 stock needs a negative PE or a PE more than how many times the Nifty 500?

The condition is a PE above twice the Nifty 500.

3. What price band applies from T+2 to stocks in Stage 1 of the ESM?

Stage 1 comes with a 5% price band from T+2.

This topic is part of Daily Current Affairs 31 July 2025 (16 topics).

All topics of the dayDay quizJuly 2025

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