Market regulator Securities and Exchange Board of India has announced that the rules for short-selling will be announced very soon. FIIs will be able to sell shares without owning them also known as short-selling. There would be many benefits with the introduction of this facility.

SEBI Chairman Mr. M Damodaran said, “We are ready for short-selling now. There is no hiccup and the regulations are coming very soon.”

In other words, FIIs will be allowed to borrow stocks from some broker and sell it in the stock markets. They may later cover the stock and will return to the broker. Short selling may enable FIIs to make money from falling stocks. The covering can be done at lower levels.

Damodaran informed that all the guidelines were almost finalized. There are a few formalities left and final announcement will be made soon.

Short selling was approved in a Board meeting held on March 22. The new rules will allow both FIIs and domestic institutional investors.

Mr. Damodaran said that the Indian markets have matured and there may be very less problems due to introduction of short-selling.

Short-selling is allowed in many other stock markets as it gives more flexibility to traders. FIIs were demanding short-selling since a very long time. It is believed that Short-selling helps to the markets to be stable during volatile sessions.

Technical Analysts have welcomed the decision of SEBI regarding short-selling. It will help to increase liquidity in the markets. Usually, in falling markets, the trading volumes shrink. Short selling will help to keep volumes higher even during fall in the markets.