All restrictions on short sales, therefore, should be countered with equal curbs on taking long positions. Why give undue advantages to speculative buyers?
More importantly, a case seems to be being made out that short-sellers are responsible for the dowturn in the market. Short-selling, however, is a symptom of falling markets, not their cause. Prices which fall mainly due to short-selling, move up again due to short-covering, thus balancing the equation. The markets should be left to find their own level, without government interference.
If Sebi wants to curb speculation totally, it should make the transaction cycle T+1, .i.e. cash/delivery against trade. This will eliminate problems of short-selling. Unfortunately, volumes on the exchange would disappear, making stock markets illiquid. And even a small trade will result in high volatility.
