Disapproving of stock lending and borrowing activity of foreign institutional investors to overseas entities, which could be used like short selling, market regulator Securities and Exchange Board of India on Monday warned of stronger action against such practice, if so needed.

"Sebi disapproves of the overseas lending/borrowing activity of FIls and the consequent selling pressure in the cash market in India. Sebi has communicated its disapproval to FIls.

"The lending/borrowing activity of FIls is being monitored and if necessary stronger measures will be taken by Sebi as considered appropriate," the market regulator said.

Sebi asked custodians to communicate to their foreign institutional investors the disapproval of Sebi in this regard.

Sebi had last week asked FIIs and their agents to provide information on the quantity of participatory notes they had issued to overseas entities which could be used like short sale.

"The foreign institutional investors, sub-accounts are required to submit information about the quantity of securities which they have lent to entities other than in the Indian securities market -- where the overseas derivative instruments are issued - which has the effect of a short sale in the Indian security," Sebi said.

Following this, 17 FIIs had provided information about participatory notes issued to overseas entities for the period October 10, 13 and 14.

According to the information provided to the market regulator for the period of October 10, 13, 14, the PNs issued to overseas entities had the largest number of ITC shares as underlying securities.