Data released by the Securities & Exchange Board of India (Sebi) on the details of the securities lent for short sales or derivative instruments that have a similar effect, by the foreign institutional investors reveals that there was a strong short position build up during October 7 to October 10.
Numbers reported by 17 FIIs reveal a build up of short positions in the market from October 3 till October 10, when the market witnessed one of its largest fall of around 16%. However, despite this bear hammering, the market continued smoothly and there were no reports of large defaults.
The data for around 42 companies reveals that around 1.07 crore for the period between October 10 and 14, as shares were lent to overseas investors for covering their short positions of synthetic instruments that require to be covered.
A closer analysis reveals that huge short positions were starting to get built from October 6 and intensified on Friday October 10. The Sensex tanked by 800 points on October 10. However, when the market opened on Monday October 13, a huge rally of 781 points was witnessed.
A similar trend was witnessed in the scrips that featured were lent for covering the position. Top amongst these are ITC, HDIL, L&T and HUL. And companies like SAIL, Tata Steel and even ICICI Bank feature in the list in dicating that there were large short positions built in these companies.
At the moment, data is compiled from reports submitted by 17 major FIIs. The regulator expects the subsequent reports to be more complete. A Sebi statement says,?The outstanding position as on October 09, 2008 has also been called for which shall be disseminated as soon as it is available.?