The markets regulator Securities and Exchange Board of India (Sebi) is not against short selling a strategy in which the trader borrows securities to sell in the open market, with the expectation to buy back when the price falls, making a profit in the process. Sebi's whole time member Kamlesh Varshney, however, warned that naked short selling could not be permitted in India.
The market jargon was in the news when American short seller Hindenburg Research accused Adani Group of accounting fraud and stock manipulation early last year. "First of all, I fully agree that there is nothing wrong in short selling. In fact, if you remember, this particular issue came up before the Supreme Court and while this issue was being examined, Sebi also exactly said the same thing that short selling should not be banned," Varshney said, while speaking at the Mint BFSI Summit.
Naked short selling is a practice where short positions are taken without providing any security or assurance that the seller would honour his commitment.
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