SEBI may probe the role of short sellers in bringing down Indian markets
Naked short selling is not permitted in the Indian securities market and all investors would be required to mandatorily honor their obligation of delivering the securities at the time of settlement.
As per Securities and Exchange Board of India (SEBI) norms, short selling shall be defined as selling a stock that the seller does not own at the time of the trade. All classes of investors, viz., retail and institutional investors, shall be permitted to short-sell.
The securities traded in the F & O segment shall be eligible for short selling. SEBI may review the list of stocks that are eligible for short-selling transactions from time to time.
The institutional investors shall disclose upfront at the time of placement of order whether the transaction is a short sale. However, retail investors would be permitted to make a similar disclosure by the end of the trading hours on the transaction day.
The brokers shall be mandated to collect the details on scrip-wise short-sell positions, collate the data and upload it to the stock exchanges before the commencement of trading on the following trading day. The stock exchanges shall then consolidate such information and disseminate the same on their websites for the information of the public on a weekly basis. The frequency of such disclosure may be reviewed from time to time with the approval of SEBI.
The issue of short selling has come to the fore following the market meltdown and the crash in Adani group stocks.
SEBI is likely to probe short selling in the Indian stock markets in the last few days. Sources said Indian markets have been under an onslaught in the last few trading sessions and a probe will ascertain the role of short sellers in bringing the market down.
According to a SEBI discussion paper, short selling — the sale of a security that the seller does not own — is one of the long-standing market practices, which has often been the subject of considerable debate and divergent views in most of the securities markets across the world.
Short selling is considered as a desirable and essential feature of a securities market. The critics of short selling on the other hand are convinced that short selling, directly or indirectly, poses potential risks and can easily destabilize the market.
In an efficient futures market, the relationship between the spot price and the futures price of the underlying asset is governed by cash-and-carry arbitrage and reverse cash-and-carry arbitrage. The latter requires that traders should be able to sell the underlying security short unless of course there are enough traders who own the security and are able to sell it cash to take advantage of a too-low futures price.
It is noteworthy though, that despite the conflicting schools of thought, securities market regulators in most countries and in particular, in all developed securities markets, recognize short selling as a legitimate investment activity. Such jurisdictions also have an active market for equity derivatives which includes stock futures. Some jurisdictions even recognize the usefulness of naked short sales in certain circumstances and instead of prohibiting short sales; the regulators have permitted them to take place within a regulated framework.
Adani Group has said in a statement that the accounting (or fraud-type assertions) “investigation” by Hindenburg is devoid of facts. Of Adani’s portfolio’s nine publicly listed entities eight are audited by one of the Big 6.
On leverage or over-leverage issue — 100 of our various companies are rated (these account for nearly 100 percent of our EBITDA), Adani Enterprises said in a stock exchange filing.
On revenue or balance sheet being artificially inflated or managed — out of nine listed companies in Adani portfolio six are subject to specific sector regulatory review for revenue, costs, and Capex, Adani Group said.
In relation to governance, four of our large companies are in the top 7 percent of the peer group in emerging markets or the sector of the world. On the LAS position do note that overall promoter leverage is less than 4 percent of promoter holding, the group said.
[With Inputs from IANS]
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Indian stock market and SEBI are jokes! No one will care for what SEBI says – they all have their hand in the cookie jar!
Anyone who owns stock of Adani companies should look to losses.
Look at their PE Ratios. Manipulate up- no checks. Everyone asleep.
I guess you can add SEBI to ED, CBI, IT etc aspart of the hit team.