As part of efforts to broaden the equity markets, regulator Securities Exchange Board of India will issue guidelines on short-selling within two-three months that will enable institutional investors to sell stocks without owning them.

"The guidelines for short-selling would be coming in 2-3 months," Sebi Chairman M Damodaran told PTI. The market watchdog at its board meeting held on March 22 had allowed short-selling by institutional investors, both domestic and foreign.

However, the relevant guidelines or notification is yet to come. The decision on short-selling followed the announcement by Finance Minister P Chidambaram in the Budget on February 28 on the issue.

The Sebi-appointed secondary Market Advisory Committee, had also recommended short-selling by institutional investors in October 2005. Currently, short-selling is only available to retail investors and institutional investors are not allowed.

It is believed that initially short-selling would be permitted only in those stocks in which derivative products are available. Besides, naked short sales might not be permitted, which means investors would be required to honour their obligation of delivering the securities at the time of settlement.