No plan to stop short-selling, says SEBI chief

20 November 2008

Mumbai: The Securities and Exchange Board of India (SEBI) has ruled out a ban on short-selling as it has no proof that short-selling is the reason behind the falling markets.

SEBI chairman C B Bhave said there was no evidence linking falling stock prices and short-selling. SEBI has not found any FII having lent any shares off-shore after "we conveyed our regulatory disapproval to them on the issue" either, he added.

He cited the example of western markets, which have banned short-selling but still continue to decline. In fact, he said, some of the financial institutions in the West have re-started short-selling in their markets after the recent bank failures.

Bhave said that foreign institutional investors were both purchasing as well as selling, and they cannot, therefore, be seen as mere sellers.

"But, on a net basis, they are sellers. So probably, long-term funds are buying into Indian market as well," he added.

''We don't really have evidence that short-sellers are driving the market down," Bhave said on the sidelines of a conference.