Sebi may probe short selling to hammer down Indian markets: Report

The market regulator, SEBI is likely to check short selling in Indian stock markets in the past few days.

Sources said that Indian markets have been under attack in the last few trading sessions and a probe will determine the role of short sellers in lowering the market.

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 always been the subject of much debate and variety. views of most securities markets around the world.

Voters consider short selling as a desirable and an important part of a securities market. Critics of short selling on the other hand are convinced that short selling, directly or indirectly, has potential risks and can easily destroy 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 must 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 in cash to take advantage of a very low futures price.

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It should be noted, however, that despite conflicting schools of thought, securities market regulators in most countries and especially, in all developed securities markets, recognize short selling as a legitimate investment activity. Those jurisdictions also have active markets for equity derivatives that include stock futures. Some jurisdictions even recognize the usefulness of bare short selling in certain circumstances and instead prohibit short selling; regulators allow this to happen within a regulated framework.

The International Organization of Securities Commissions (IOSCO) also examines short selling and securities lending practices in markets and recommends transparency in short selling, rather than banning it.

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According to media reports, in 2022, US prosecutors are considering racketeering charges in a broad investigation of hedge funds and research firms that bet against stocks.

The US Department of Justice has issued subpoenas to several companies as part of a sweeping investigation focused on potential manipulative trading around negative reports on listed companies published by some of their investor, media reports said.

The Adani Group said in a statement that the accounting (or type of fraud) “investigation” of Hindenburg was devoid of facts. Of the nine publicly listed Adani portfolios, eight are audited by one of the Big 6.

On the leverage or over leverage issue — 100 of our various companies are rated (this accounts for almost 100 percent of our EBITDA), Adani Enterprises said in a stock exchange filing.

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On income or balance sheet artificially inflated or managed — out of nine listed companies in the Adani portfolio six are subject to sector-specific regulatory review for income, expenses and capex, Adani Group said.

In relation to management, four of our largest companies are in the top 7 percent of the peer group in Emerging markets or in the sector or in the world. In the LAS position, note that the promoter’s total leverage is not less than 4 percent of the promoter’s holding, the group said.



(Only the headline and image of this report may have been edited by Business Standard staff; the rest of the content was automatically generated from the syndicated feed.)


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