Short sales by institutions from Feb 1: Sebi

Securities and Exchange Board of India (Sebi) today said it would allow institutional investors to start short selling, which was banned way back in 2001 in the aftermath of the Ketan Parekh scam, from February 1.

Reserve Bank of India (RBI) has given its nod to FIIs for short selling, and now Sebi will allow it for all institutional investors from February 1, Sebi chairman M Damodaran said today.

It would be for all institutional investors - FIIs and domestic institutions like mutual funds, Damodaran said.

Damodaran's comments came a day after the Reserve Bank allowed foreign institutional investors and their sub-accounts to short sell shares.

Retailers are already allowed to short sell - selling shares they do not own and cover the trade at a later date.

Damodaran was addressing the national programme on director orientation organised by the Institute of Company Secretaries of India (ICSI).

He also said Sebi was willing to review the 10% limit of directors or key management personnel, which is  proposed to be brought under the insider trading norms.

"What we have put out yesterday is a paper for discussion. Whether 10% held by officers or promoters was too high or low would be finalised after receiving public comments," he said.

The regulation, Damodaran said, was aimed at checking insiders who have greater access to price sensitive company information and could use this for making short-term profits.

Sebi, in order to curb insider trading, had proposed that company insiders should surrender profits made in any equity-based securities transactions of the company if both the buy and sell side of the transaction are entered into within six months.