VaR Margin Rate shot up to 100% for Adani Green overnight

This has happened because Adani Green was recently added to Long-Term ASM Framework Stage – IV (Refer to this circular – NSE/SURV/48487). In the circular, the following is mentioned –

Members are hereby requested to note that the securities as per attached Annexure I-A have satisfied the criteria for inclusion under Long Term Additional Surveillance Measure. The applicable surveillance actions shall be as per provisions of the Long-Term Additional Surveillance Measure (Long Term – ASM) which are as under:

  • Applicable rate of margin shall be 100% w.e.f. June 09, 2021 on all open positions as on June 08, 2021 and new positions created from June 09, 2021.

There was an update to the criteria for shortlisting stocks under the Long-Term ASM framework (Refer to this circular – NSE/SURV/48506) on June 4th, 2021. Shortly after that, on 4th June 2021 itself, the circular referenced earlier (NSE/SURV/48487) was issued, which led to Adani Green being added to Long-Term ASM Framework Stage – IV directly.

If we compare the latest circular (NSE/SURV/48506) with the last circular modifying the criteria for shortlisting stocks under the Long-Term ASM framework (NSE/SURV/45111), a new criteria was introduced in the latest circular –

7)  Scrips with price band of ±10%, ±5%, ±2%

AND

Close-to-Close Price Variation (based on corporate action adjusted prices) in 365 days ≥ (200% + Beta (β) of the stock * Nifty 50 variation)

AND

High-Low Price Variation (based on corporate action adjusted prices) in 365 days ≥ (300% + Beta (β) of the stock* Nifty 50 variation)

AND

Market Capitalisation > Rs. 1000 Crores as on review date

AND

Concentration of Top 25 clients ≥ 25% of combined trading volume of NSE & BSE in the stock in last 30 days

Action on the stocks shortlisted as per Criteria 7:

  1. The shortlisted scrips shall be placed directly in Stage IV of Long Term ASM w.e.f. beginning of T+3 days (T day being the day on which scrip was shortlisted).

  2. The shortlisted scrips shall be retained in Stage IV for a minimum period of 90 calendar days.

  3. Post completion of 90 calendar days, such scrips shall be subjected to stage-wise review (that is at present undertaken on weekly basis by the Stock Exchanges).

Securities completing 90 calendar days in Long-term ASM Framework would be eligible for exit from the framework subject to stage-wise exit.

From what I understand, Adani Green likely met the newly introduced criteria and was directly added to Long-Term ASM Framework Stage – IV. If I were to guess, this might have happened due to the recent MSCI re-balancing that occurred on May 27th, 2021


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Author Of this post: @Prayag Prayag Verma
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