Short selling is back

After dithering for a while, SEBI (Securities & Exchange Board of India) has finally decided to bite the bullet on short sales.

All for liquidity To be re-introduced from April 21, 2008 To be limited to F&O stocks initially Naked sales not permitted

A circular issued by the market regulator has clarified that from April 21, 2008, both retail and institutional investors will be allowed to short sell in the cash market.

SEBI will facilitate the process through a borrowing and lending module, and initially all F&O stocks will be brought under it. This will enable short sellers to borrow shares to meet the delivery requirements.

There is a rider though: SEBI has ruled that naked short selling will not be permitted (delivery of shares will be mandatory).

 — Rishi Joshi