Institutional investors chary of new Sebi norms

New Delhi: Foreign Portfolio Investors (FPIs) are still clueless over the likely impact of the new norms by markets watchdog Sebi, which said that institutional investors have to disclose upfront at the time of placing an order whether a proposed transaction is a short sale or not, a significant move aimed at curbing market volatility. The Securities and Exchange Board of India (Sebi) has made certain changes with respect to norms pertaining to short selling in the market. Short selling refers to selling a stock which the seller does not own at the time of trade. Both retail and institutional investors are permitted to short sell stocks.

Amending a circular relating to short selling issued last year, Sebi said: “The institutional investors shall disclose upfront at the time of placement of order whether the transaction is a short sale.”

However, retail investors would be permitted to make a similar disclosure by the end of the trading hours on the transaction day. “The brokers shall be mandated 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. The stock exchanges shall then consolidate such information and disseminate the same on their websites for the information of the public on a weekly basis,” Sebi said in a circular on Friday. The circular, issued to stock exchanges, clearing corporations and depositories, also said the frequency of such disclosures may be reviewed from time to time with the approval of Sebi. In recent times, there have been concerns about the practice of short selling and subsequent volatility in the securities market. Long positions are steadily declining and short positions are building up. This short build up is on bearish expectations that the present high valuations are difficult to sustain and some triggers may lead to sharp corrections, he said. This expectation need not be realised since global cues have again turned positive on a rally in the US market. Domestic cues are looking good. Buy on dips strategy may work again leading to some short covering, he said.

Strong JLR numbers from Tata Motors and the attractive buy-back offer from Bajaj Auto will give support to the Nifty Auto Index. The real estate segment is doing well and the margin expansion happening in the industry bodes well for the sector. But the good news is in the price, he said.