What risks do investors face with surveillance stocks?

Investors face significant risks with surveillance stocks, primarily reduced liquidity and trading restrictions (like T2T, price bands, limited frequency, higher margins) due to regulatory action, increasing the difficulty and cost of buying/selling, alongside high volatility and potential for sharp price drops, making them risky bets even beyond general market risk. These measures, like ASM/GSM, signal underlying issues (poor financials, high promoter pledging, manipulation), meaning higher potential for substantial losses if the company fails or faces delisting.
Key Risks for Investors in Surveillance Stocks:
Liquidity Risk:
T2T (Trade-to-Trade): Intraday trades are banned; you must hold the stock for at least one day, making quick profits impossible and exiting difficult.
Periodic Call Auctions: Some stocks trade only once a week, severely limiting trading opportunities.
Reduced Trading: Overall trading volumes dry up, making it hard to sell large quantities without causing significant price drops.
Regulatory Restrictions & Costs:
Price Bands: Strict limits (e.g., 5%) control volatility but also restrict upward movement and can trap investors.
Higher Margins: You might need to deposit 50-100% extra cash (Additional Surveillance Deposit) just to hold the stock.
Volatility & Price Risk:
High Price Swings: These stocks are often highly volatile, experiencing sudden, large price drops, indicating potential distress or manipulation.
Fundamental Weakness: Surveillance often flags companies with poor fundamentals, like sustained losses, high promoter pledging, or compliance issues, increasing bankruptcy risk.
Operational Risks:
Account Suspension/Penalties: Heavy trading violations can lead to penalties or even trading blocks.
Market Exit: Some stocks face delisting or move to restricted segments, making them almost untradeable.