India’s Capital Market Regulator, Securities and Exchange Board of India (SEBI) has finally given permission to institutional investors for short selling. Earlier, only retail investors could short sell.

The Stocks in the futures and options (F&O) segment would also be available for short selling, the release said.

Short selling is defined as a process through which an investor can sell a stock, he does not own at the time of the trade

SEBI banned short sales in the Indian securities market in early 2001 following the Ketan Parekh scam.

SEBI also allowed the Securities Lending & Borrowing (SLB) scheme, which will allow traders to borrow stocks and honor their sales. All classes of investors will be allowed to participate in the stock lending and borrowing programme.

The main feature of the SLB scheme is that the lending/borrowing will be for term of 7 days, to begin with. There will also be fixed standardized contracts for the securities under the SLB.

According to the press release, the settlement cycle on SLB will be on a T+1 basis, which means, investors are required to settle their transactions a day after their trades.

The brokers would have 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, it added.

However, the regulator has not yet specified a date for implementation of the entire process.