Bhave rules out to stop short-selling

Averting the rumours ‘short-selling is going to be closed soon’ Chandrakant Bhaskar Bhave, the Chairman of Securities and Exchange Board of India (SEBI) – the stock market regulator – on Thursday said that SEBI had no intension to stop short selling in India. He was addressing to media on the sidelines of an India-Malaysia Capital Markets conference in New Delhi.

There is no such evidence that short selling – the buying and purchasing strategy used for equities in which the investor or trader sells a borrowed share. If the market goes down, the investor makes a profit as he can buy the stock at a lower price than the one at which he sold short - is driving the equity markets down, said Bhave adding that some foreign countries that had closed the short-selling, estimating the major cause of market collapsing, has been going to start it again.

Specifying the reason behind global market collapsing, SEBI Chairman said that the ongoing gloomy recession and lack of liquidity had collapsed their (foreign countries’) financial institutions one by one. ‘The subsequent failure of financial entities and the consequent global recession that has set in’, he added.

Even, Bombay Stock Exchange, Sensex had sunk by 37.54% since September 15, when Lehman Brothers went bankrupt.

Earlier, Finance Ministry had also ruled out that short-selling was not the prime reason for market collapsing.

On the issue of Foreign Institutional Investors (FII) –the major foreign participants in the Indian stock market- Bhave said that SEBI has not found FII having lent shares off-shore after regulator had conveyed its disapproval to them on the issue.

Last Month, SEBI had warned some FIIs against short-selling Indian equities to overseas entities.

The regulator is still examining the investment pattern of FIIs, said Bhave. “We are trying to look at what is happening to FIIs and why they are sellers on a net basis,” he added.

On the possibility of Indo-Malaysia tie up for stock market investment and trading, Bhave hoped that India and Malaysia could work together in the area of cross listing. In future, Indian investors can seek their profit in Malaysian market, while Malaysians can also do the same in Indian bourse.

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