Search the Internet          Tips  Sites: Finance, Investment

Short sale ban to impact liquidity: Market players

NetScribes/Salil Panchal & Rajiv Banerjee

A section of the domestic brokerages and foreign institutional investor brokerages said that Sebi's decision to restrict short sales from March 8 will turn the markets hollow and impact liquidity in a major way over the long term. Brokers are also of the view that the regulator should not artificially alter trading parameters and instead should continue to monitor margin structures and collection systems closely at the exchanges.

The move will also hit the brokers who specialised in arbitrage trading at the main bourses, the Bombay Stock Exchange and National Stock Exchange.

A senior DSP-Merrill Lynch official, on condition of anonymity, said that the regulator should not be concerned about whether the markets are moving up or down. "While artificially influencing the market, the regulator through this norm will restrict liquidity," he said.

Navin Agrawal, senior dealer, SVS Securities, a BSE brokerage said, "The markets are going to become more hollow. The regulator does not act when the markets are in a bullish phase and they act when the markets are moving down.''

"In the short-tern it is useful to curb volatility but over the long term it hampers the markets. In fact, no restriction is good for the markets,'' said Imran Contractor, an investment analyst. He added that Sebi may even be forced to turn back on its decision.

Sebi imposed restrictions on short sales effective March 8 to curb excessive volatility in the share prices. The sale of shares will have to be followed by delivery. Sebi has also said that this imposition will be reviewed after a period of two weekly settlements.

Money

Business News

Tell us what you think of this report