The aforesaid securities were placed in suspended animation from Tuesday, as exchanges stated that the trade in these stocks shall be permitted only once a month.
The development comes a day after the market regulator directed major indices -- National Stock Exchange of India (NSE), Bombay Stock Exchange (BSE) and Metropolitan Stock Exchange of India -- through a letter sent late on Monday evening to initiate action against stocks of these suspected firms.
The Sebi letter forwarded a list of 331 suspected "shell companies" identified by the Ministry of Corporate Affairs.
According to the letter, trade in all the 331 listed securities shall be placed in "Stage VI of the Graded Surveillance Measure (GSM)" with immediate effect.
"If any listed company out of the said list is already identified under any stage of GSM, it shall also be moved to GSM stage VI directly," the letter said.
The stage VI of GSM framework mandates the exchange to allow trade in the identified securities only once a month under its trade-to-trade category.
The framework further mandates that any upward price movement in these securities shall not be permitted beyond the last traded price amongst additional surveillance measures.
The letter further read: "Exchanges shall initiate a process of verifying the credentials, fundamentals of such companies.
"Exchanges shall appoint an independent auditor to conduct audit of such listed companies and if necessary, even conduct forensic audit of these companies to verify its credentials, fundamentals."
Besides, the letter stated that shares held by the promoters and directors in "such listed companies" shall be allowed to be transferred by depositories only upon verification by the exchanges concerned and they shall not be allowed to transact in the security except to buy securities in the said listed company until verification of credential, fundamental by exchanges is completed.
"Sebi order has taken industry and investors by surprise. This has lead to erosion of serious wealth and if some of the companies are found to be not shell companies, this order shall still be a death knell on their perception and valuation," said Rajesh Narain Gupta, Managing Partner, SNG & Partners.
"Devil lies in details so we need to a deep dive on this order. It is not clear whether show cause or appropriate notice was given to these companies to justify whether these are actually shell companies or not."
The directive by Sebi spooked investors, along with broadly negative global cues dragged the key Indian equity indices -- the BSE Sensex and the NSE Nifty50 -- lower on Tuesday.
The NSE Nifty50, which closed above the psychologically important 10,000-point mark for the first time on July 26, slipped to below that level by the day's close.
The wider NSE Nifty50 closed at 9,978.55 points -- down 78.85 points or 0.78 per cent -- from its previous session's close.
The 30-scrip Sensitive Index (Sensex) of the BSE, which opened at 32,341.05 points, closed at 32,014.19 points -- down 259.48 points, or 0.80 per cent -- from its previous close at 32,273.67 points.
"Market sentiment was also impacted after market regulator Sebi yesterday, 7 August 2017 imposed trading restrictions on 162 listed entities identified as shell companies," Deepak Jasani, Head of Retail Research, HDFC Securities, told IANS.
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)