Right after admonishing the foreign institutional investor (FIIs) over the practice of lending shares in the overseas markets for short selling purposes, the Securities & Exchange Board of India (Sebi) is said to have met them to discuss the matter.
The meeting was intended to clear the air about the communication that Sebi had sent last week regarding lending of stocks overseas for short selling purposes, said sources. The custodians were supposed to communicate the disapproval and therefore the FIIs wanted to get the regulator?s exact view and stance on the matter as media reports about a ban on short selling had started doing the rounds. Also, a set of Indian institutions had made suggestions to the regulators regarding disallowing FIIs to lend shares overseas.
In the meeting, sources add, overseas investors were categorically told to stop this practice as a viable short selling platform was available for them in India as well. It has been learnt that discussions remained amicable and both the sides listened each other out.
The regulator now awaits the data for the build up of short positions in the market and will take its action based on further analysis. Meanwhile, for the first time in the month of October, FIIs were net buyers to the extent of Rs 113.90 crore or $28.2 million, according to the statistics made available on the Sebi website.
Sebi chief, CB Bhave had made it abundantly clear at the press conference, after the board meeting early this month, that the regulator would track all know your customer norms with the FIIs. This was while he announced that the limits regarding participatory notes issued by FIIs were being done away with. Trade experts believe that there will be extensive investigation in this matter in the days ahead.