A view of the National Stock Exchange (NSE) building in Mumbai. file | Photo Credit: Reuters
The National Stock Exchange (NSE) issued a three-page statement late on March 19, 2023, stating its monitoring action on individual stocks and the inclusion or exclusion of stocks in various Nifty indices” operate without transparent” policies and regulations. human conscience”.
The statement comes two days after the exchange removed three Adani group stocks, including its flagship Adani Enterprises, from its short-term additional monitoring framework. Stocks are put under an additional monitoring framework by the exchanges to protect investors amid high volatility.
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The NSE statement also sought to defend the decisions of its subsidiary NSE Indices, saying “there was no human discretion in deciding the inclusion or exclusion of any stock.” [sic] its index”. Last month, the subsidiary had announced the addition of five Adani group firms to its 14 indices, effective March 30, while retaining Adani Enterprises and Adani Ports and SEZ in its flagship Nifty 50 index.
While the reconstitution of the indices was based on trading data for the six-month period ended January 31, financial experts sought a review of the move to protect investors’ interest amid a slump in the group’s shares since January 24, when the U.N. S. -based Hindenburg Research released a report alleging several misdeeds by the group.
“NSE surveillance action on eligible stocks is implemented as per transparent norms. These rules are non-discretionary, pre-announced and automatically applied,” the exchange said, adding the criteria are in the public domain, “common across exchanges” and “automatically applied and do not allow for any human discretion.” Is”.
The exchange also underlined that “the overall risk management framework put in place for trading in the secondary market is specifically designed to provide robustness to the capital market ecosystem in volatile times.”
“Similarly, the inclusion and exclusion of stocks in various Nifty indices on a periodic basis is done as per transparent policies. All Nifty indices are maintained by NSE Indices and are based on index methodologies which are objective, non-discretionary, rule based, pre-announced and transparent,” said the exchange.
Stating that the subsidiary follows a “robust index governance practice through various governance committees to monitor policies relating to index benchmark policy changes or index constituent changes”, NSE said these committees also include external independent members. Are. “All changes in policies relating to the constituents of any index are approved by such index governance committees. The rules are applied automatically without human discretion,” it added.
“Thus the existing pre-announced, transparent, rule-based, automated, non-discretionary regulatory framework for monitoring measures and for index inclusion/exclusion in NSE, no human discretion is possible for anyone and this is the basis of the entire process and practice.” Has been going on for decades,” NSE underlined.
Late last month, the Congress protested outside the NSE headquarters against the move to include and retain Adani Group’s shares in its indices, thus directing index fund investments of small investors to these stocks. The Congress again on Friday questioned markets regulator Sebi’s silence on NSE’s decisions, including the move to remove the firm’s shares from the additional monitoring framework.
