What Is the ESM Framework? NSE and BSE Rules (2026)

The ESM framework is the Enhanced Surveillance Measure that NSE and BSE apply to smaller listed companies, covering main board and SME segment securities with market capitalisation below 1,000 crore rupees. A stock enters on objective price parameters, not on a view about the business, and the consequence is tighter settlement: trade for trade, a narrow price band and a 100 percent margin.

What puts a stock into the ESM framework?

Shortlisting under the ESM framework uses market-based parameters decided jointly by SEBI and the exchanges: high-low variation, close-to-close price variation, market capitalisation and standard deviation. A security qualifies for Stage I if either of two conditions is met.

The first is a high-low price variation, on corporate-action-adjusted prices, of at least one standard deviation over three, six or twelve months, together with a minimum threshold of more than 75 percent over three months, 100 percent over six months or 150 percent over twelve months.

The second is a close-to-close price variation of at least one standard deviation over the same windows, with thresholds of more than 50 percent, 75 percent and 100 percent respectively.

Three categories are excluded from the shortlisting run: securities with derivative products available on them, securities already under the Insolvency and Bankruptcy Code, and securities already at GSM Stage II or above.

The two ESM stages

Stage I. The applicable margin becomes 100 percent from the T+2 day. Settlement moves to trade for trade with a 5 percent price band, or a 2 percent band if the scrip already sat in a 2 percent band.

Stage II. A Stage I security moves up if, over five consecutive trading days, its close-to-close variation on adjusted prices reaches 15 percent or more, or if the monthly close-to-close variation reaches 30 percent or more. At Stage II the price band tightens to 2 percent, the 100 percent margin continues, and trading runs under a periodic call auction with a 2 percent band on all trading days.

Stage II is the more consequential step. A periodic call auction replaces continuous trading with scheduled matching, which changes how and when an order can be filled.

How long does a stock stay under ESM?

Stage review runs weekly. A security completing 90 calendar days in the framework becomes eligible for stage-wise exit, provided it no longer meets the Stage I entry criteria.

A security at Stage II carries an extra condition: it stays at Stage II for a minimum of one month, and after that, if the weekly review finds its close-to-close price variation was under 8 percent in a month, it can step down to Stage I.

One asymmetry is worth knowing. Market capitalisation is used only for inclusion, never for exit. A company that grows past the 1,000 crore threshold while under ESM does not leave on that basis.

ESM, ASM and GSM are three different frameworks

They are often confused because they can apply at the same time and the surveillance indicator on the order screen looks similar.

NSE assigns indicator 34 to ESM Stage I and 35 to ESM Stage II in its consolidated surveillance indicator list. For the difference between the fundamentals-driven and behaviour-driven frameworks, see GSM vs ASM surveillance and what is the ASM list.

What an ESM tag does not mean

NSE's FAQ answers this directly: shortlisting of securities under ESM is purely on account of market surveillance and should not be construed as an adverse action against the concerned company or entity. The framework reads the tape, not the accounts.

An ESM entry also tells you nothing about who was trading. That question lives in the disclosure record: the shareholding pattern for quarterly holding changes, the block deal disclosures for large trades on specific dates, and encumbrance filings for forced selling. The current list is published by the exchanges as a file, with changes announced by circular after market hours, typically one trading day before they take effect.

Flock reports the filings themselves, each stamped with its date and linked back to the exchange or regulator that published it. The ESM framework list is the exchanges' own. Not investment advice.