Both corporates and mutual funds face problem of liquidity
MUMBAI: The Securities and Exchange Board of India on Thursday ruled out stopping short-selling as the regulator had no evidence that short-selling was driving the market down.
“We don’t really have evidence that short-sellers are driving the market down,” SEBI Chairman C. B. Bhave told reporters here on the sidelines of a conference.
The Chairman said that though some western markets had banned short-selling, their markets had continued to decline further. “Their (financial) institutions failed one after another. Some of them have re-started short-selling in their markets,” Mr. Bhave said.
Commenting on foreign institutional investors (FIIs), Mr. Bhave said the regulator had not found any FII having lent any shares off-shore after “we conveyed our regulatory disapproval to them on the issue.”
“We are trying to look at what is happening to FIIs and why they are sellers on a net basis,” Mr. Bhave said. One of the things SEBI had found was that FIIs were purchasing as well as selling so it was not as if they were only sellers, he said. Mr. Bhave said the mutual funds industry was facing a problem of liquidity and that the same liquidity problem was faced by the corporates.
Corporates tried to withdraw money from mutual funds while mutual funds were holding the papers of corporates.
“So who is going to buy if there is not enough liquidity in the market? It was essentially a liquidity crisis,” Mr. Bhave said.
Asked on the SEBI-Malaysian Securities Commission partnership, he said the market regulator and the Malaysian entity could work together in some areas.
One of the areas could be cross-listing, he said, where a Malaysian company could seek to raise capital in India and vice-versa. This way, there will be an access for Malaysian investors to tap Indian companies and Indian investors to tap Malaysian companies. — PTI