The government has found no link between short-selling of securities by foreign funds overseas and the recent steep fall on domestic bourses, strengthening the case for allowing them to carry on overseas stock<http://economictimes.indiatimes.com/FII_short-selling__market_fall_not_linked/articleshow/3715022.cms#>lending and borrowing activities.
Short-selling, which involves the sale of borrowed securities in the hope of buying them back at a cheaper price, had come under regulatory scrutiny after fears were raised in various quarters that it was responsible for the fall in Indian markets late last month. Short-selling by speculators has been blamed for sharp falls across global stock markets<http://economictimes.indiatimes.com/FII_short-selling__market_fall_not_linked/articleshow/3715022.cms#>and many countries, notably the US, have temporarily banned the practice. However, officials said they had found no link between short-sales overseas and the market fall in India. "Only 0.2% of the total 10,000 crore shares<http://economictimes.indiatimes.com/FII_short-selling__market_fall_not_linked/articleshow/3715022.cms#>in 224 companies (19.2 crore shares) were lent by them abroad till October 9. Besides, price movements in 10 biggest price losers in the domestic market had no relation with the overseas lending activity in their scrips," a senior finance ministry official, who asked not to be named, said on Friday. In nine out of 10 cases where prices fell the most, at most only one or two in 10,000 shares were lent offshore. In one case, it was slightly more than 1%, the official said, adding that it proved there was no empirical evidence to suggest a link between stock lending by foreign funds and a fall in share prices. The non-promoter holding in the 10 firms which saw the largest fall in prices was just 0.58% of their total paid-up capital, the official added, quoting data from market regulator SEBI. Foreign funds routinely lend so-called participatory notes, which are proxies for Indian shares, to other entities that want to make a quick profit by selling them and buying it cheaper later. Market experts say although no shares change hands in India, offshore short sales impacted prices. "Suppose FIIs (foreign institutional investors<http://economictimes.indiatimes.com/FII_short-selling__market_fall_not_linked/articleshow/3715022.cms#>) sell participatory notes at a price cheaper than the prevailing domestic market price of the underlying stock, potential buyers here will hold off on the assumption that the price here will eventually fall to the level of the participatory note. This influences the behaviour of the market participants here and adversely affects prices," one expert said. On October 20, Sebi expressed its displeasure at the practice of stock lending by foreign funds overseas, although it did not impose a formal ban. It asked them to reverse all lending and borrowing positions taken before and after the date. As per data provided by foreign funds to Sebi, the highest number of shares lent by foreign funds was in the case of ICICI Bank<http://economictimes.indiatimes.com/FII_short-selling__market_fall_not_linked/articleshow/3715022.cms#>at 1.27 crore. http://economictimes.indiatimes.com/FII_short-selling__market_fall_not_linked/articleshow/3715022.cms -- ekamber The only use of an obstacle is to be overcome. All that an obstacle does with brave men is, not to frighten them, but to challenge them. --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups "Kences1" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [EMAIL PROTECTED] For more options, visit this group at http://groups.google.com/group/kences1?hl=en -~----------~----~----~----~------~----~------~--~---
