The pop-up notification indicating that a stock is included in the ESM (Enhanced Surveillance Measure) surveillance list is designed to ensure that investors are well-informed about the surveillance measures before they purchase a specific stock. This measure is mandated by the exchanges and requires brokers to display a notification detailing all surveillance actions on the instrument when a client attempts to place an order.

Here’s a breakdown of the reasons and framework behind the ESM notification:

• Investor Awareness and Protection: The primary goal is to make sure that investors are fully aware of the enhanced surveillance status of the stock. By providing this information upfront, investors can make more informed decisions and understand the potential risks associated with the stock.

• Regulatory Requirement: The Securities and Exchange Board of India (SEBI) and stock exchanges have introduced the ESM framework to monitor and regulate trading in micro and small-cap companies. This framework is specifically targeted at companies with a market capitalization of less than 500 crores.

• Criteria for Inclusion: The NSE (National Stock Exchange) circular outlines specific criteria for including companies under the ESM framework. These criteria are designed to identify stocks that might exhibit high volatility or be susceptible to market manipulation.

• Enhanced Surveillance Measures: Companies placed under ESM are subject to enhanced monitoring and surveillance measures. This includes stricter scrutiny of trading patterns, additional reporting requirements, and possible trading restrictions. These measures help in maintaining market integrity and protecting investors from unusual or suspicious trading activities.

• Notification Details: When an investor tries to place an order for a stock under ESM, the pop-up notification provided by brokers will detail the surveillance measures applied to the stock. This ensures transparency and helps investors understand the implications of trading in such stocks.

The pop-up notification serves as a critical tool to inform and protect investors by providing them with necessary information about the enhanced surveillance status of certain stocks, thereby promoting transparency and market integrity.