Suzlon Energy’s Share Price Faces Halt Amidst Regulatory Measures

Suzlon Energy's Share Price Faces Halt Amidst Regulatory Measures
Suzlon Energy's Share Price Faces Halt Amidst Regulatory Measures
Suzlon Energy's Share Price Faces Halt Amidst Regulatory Measures
Suzlon Energy's Share Price Faces Halt Amidst Regulatory Measures

Suzlon Energy’s Share Price Faces Halt Amidst Regulatory Measures

Suzlon Energy’s Share Price Faces Halt Amidst Regulatory Measures

Suzlon Energy’s Share Price Faces Halt Amidst Regulatory Measures

Suzlon Energy, a company that has experienced a remarkable surge in its share price over the past year, found itself in an unexpected downturn on Monday, plummeting nearly 5%. This abrupt decline can be attributed to the company’s recent inclusion in the “ASM framework” under stage IV, effective from October 9, 2023. The term ASM stands for Additional Surveillance Measures.

Understanding the ASM IV Framework

Market regulators, the Securities and Exchange Board of India (SEBI), and various stock exchanges have introduced these enhanced preemptive surveillance measures to safeguard investor interests and bolster market integrity. While these measures are intended to control price movements and protect investors, they can have a significant impact on a stock’s liquidity.

In the case of ASM IV, the margin requirement for all clients escalates to 100%, and the price band tightens to 5%. This heightened scrutiny, according to Deepak Jasani, Head of Retail Research at HDFC Securities, makes stocks less appealing to traders. Consequently, it’s likely that profit booking may become a common trend for any stock placed under the ASM list. However, once traders complete their profit booking activities, stock prices may stabilize, a phenomenon that Suzlon will need to monitor closely.

Analysts Remain Optimistic Amidst Regulatory Hurdles

Although the recent unusual price movement prompted the exchanges and regulators to take action, analysts maintain a positive outlook on Suzlon Energy due to its improving fundamentals. The company’s commitment to reducing debt and its robust order flow have bolstered investor confidence. However, analysts emphasize the need for improved execution.

In a September report, analysts at Kotak Institutional Equities stated that Suzlon would need to deliver 5-8 GW of annual wind turbine capacity to justify its current stock price based on reverse-valuation analysis. Despite holding a 33% market share in the total installed wind electricity base, Suzlon must gain a significant market share in the wind generation sector to meet market expectations, aligning with the government’s goal of adding 8 GW of wind capacity annually until FY2030 to fulfill renewable targets.

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