No objection to short selling of shares, SEBI tells Supreme Court in Adani case
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New Delhi : The Securities and Exchange Board of India (SEBI) has indicated in the Supreme Court that it is not in favor of banning short selling or sale of borrowed shares. The regulator said it is probing the movement in its share prices as well as the allegations leveled against Adani Group by Hindenburg Research, a small short seller. The special thing is that SEBI has not taken the name of Adani Group even once in the 20-page document sent to the Supreme Court.
market activity investigation
SEBI told a bench headed by Chief Justice DY Chandrachud in a written document on Monday, hearing two public interest litigations (PILs) filed after the Adani Group’s shares fell heavily, what is short selling and what is Hindenburg Research? According to the document, SEBI is probing the allegations of Hindenburg Research and market movements both immediately before and immediately after the release of the report to investigate violations of SEBI rules and regulations on short selling.
Strong framework to deal with market volatility
SEBI also told the court that it has a robust framework to ensure uninterrupted business and deal with volatility in the stock market. SEBI claimed that developed securities markets worldwide consider short selling as a ‘legitimate investment activity’. The allegations of Hindenburg Research were rejected by the Adani Group. However, after this Hindenburg report, the market capitalization (market cap) of Adani Group companies has collectively fallen by more than $120 billion.
The market was not affected by the fall in Adani Group’s shares.
SEBI said that the recent fall in the shares of Adani Group has not affected the stock market much. Sebi said that the Indian market has seen worse volatility before. Especially, at the time of the Corona epidemic, when the Nifty fell by about 26 percent between March 2, 2020 and March 19, 2020 (13 trading days). In view of market volatility, SEBI had reviewed its existing market mechanism on March 20, 2020 and made some changes.
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