Is short selling allowed in India?

By Chizoba Morah AAA
A:

In March, 2001, the Securities and Exchange Board of India (SEBI) banned short selling in the Indian stock market. The ban was instituted partly because of a crash in stock prices and allegations that Anand Rathi, the then-president of the Bombay Stock Exchange (BSE) used confidential information acquired by BSE's surveillance department to make gains and contribute to volatility (Rathi was later absolved of any wrongdoing by the Securities and Exchange Board of India).

Shortly after the ban, only retail investors were allowed to short sell in the marketplace. In 2005, the Securities and Exchange Board of India (SEBI) recommended that institutional investors such as mutual funds be allowed to short-sell shares in the market, as well. In July, 2007, SEBI issued short selling guidelines for institutional investors and in early 2008, institutional investors were allowed to start short selling shares again. (For more on short selling, read our in-depth tutorial on Short Selling.)

This question was answered by Chizoba Morah.

RELATED FAQS

  1. How long can you short sell for?

    When an investor or trader enters a short position, he or she does so with the intention of profiting from falling prices. ...
  2. What is the difference between shorting and naked shorting?

    Short selling involves borrowing shares of a company’s stock and selling it with the hopes it can be bought back at ...
  3. What is a derivative?

    A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset, ...
  4. What is the hard-to-borrow list?

    A hard-to-borrow list has to do with securities that are available for a short sale. The list is used by brokerages to indicate ...
RELATED TERMS
  1. TIMP (acronym)

    'TIMP' is an acronym that stands for 'Turkey, Indonesia, ...
  2. Foreign remittance

  3. Short Call

    A type of strategy regarding a call option, which is a contract ...
  4. MINTs (Mexico, Indonesia, Nigeria, Turkey)

    Investopedia explains: An acronym coined by major investment ...
  5. Sponsored ADR

    An American depositary receipt (ADR) issued by a bank on behalf ...
  6. Depositary Receipt

    A negotiable financial instrument issued by a bank to represent ...
comments powered by Disqus
Related Articles
  1. Emerging Market Bond ETFs: Look Under ...
    Mutual Funds & ETFs

    Emerging Market Bond ETFs: Look Under ...

  2. Budget Tips for Foreign Students in ...
    Budgeting

    Budget Tips for Foreign Students in ...

  3. Investing In China
    Investing Basics

    Investing In China

  4. Sovereign Wealth Funds - Friend Or Foe?
    Investing Basics

    Sovereign Wealth Funds - Friend Or Foe?

  5. Introduction To Asian Financial Markets
    Economics

    Introduction To Asian Financial Markets

Trading Center