SEBI Brings Much-Needed Relief in ESM Entry-Exit Norms

SEBI has rolled out thoughtful updates to the Enhanced Surveillance Measure (ESM) framework, offering big relief to investors and listed companies.

Now, a stock will only enter ESM2 if it meets an extra filter: either the company is making losses or its Price-to-Earnings (PE) ratio is higher than twice the PE of Nifty 500 (currently 49.4). So, even if the stock sees high price gains, it won’t be added to ESM2 unless it falls under one of these categories. That’s a big win for fundamentally sound stocks.

Another change is in the exit rule from ESM2. Previously, if a stock appreciated by more than 8 percent in a month, it still stayed in ESM2. But now, that threshold has been raised to 15 percent. This gives better-performing stocks a fair chance to move to ESM1 and out of strict monitoring.

Overall, SEBI has made entry into ESM2 more selective and exit much easier—making the framework smarter and more balanced. Investors can now breathe easy knowing temporary price movements won’t trigger harsh surveillance measures.