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Sebi bans short sales to contain bear grip

In a move to contain the 'bear grip and market rumours', the Securities and Exchange Board of India has imposed a temporary ban from March 8, 2001 on short sales for scrips in the ALBM (Automatic Lending Borrowing Mechanism), BLESS and Modified Carry Forward System (MCFS).

All the sales would have to result in delivery unless the sale position is preceded by purchase of same value of the same scrip in the same name and would be in force for two settlement cycles, SEBI chairman D R Mehta told newspersons after the meeting of the risk management group.

The move comes in the wake of the unusual rise and fall of the Sensex two days after the budget. But Mehta justified today's decision and said even in developed markets short sales were banned on bearish trend.

The sale order can be given by borrowing the scrips, SEBI member J R Verma said, adding this would boost the stock based lending system on the exchanges.

Stating that investigations into last Friday's crash of the Bombay Stock Exchange sensex by 176 points were continuing Mehta said facts were being ascertained in the case of leakage of sensitive information.

On a media report about taped conversation between BSE President Anand Rathi and another official, Mehta said, "We are ascertaining the facts."

National Stock Exchange managing director Ravi Narain said the SEBI move would have a positive impact on market environment as it would be able to contain the 'rumour mill'.

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