Winning Bizness Desk
Mumbai. There is a high possibility that SEBI will investigate the short selling done in the Indian stock market in the last few days. In the last few sessions of the stock market, huge selling pressure has been seen and sources said the probe would reveal the role of short sellers in the market slump because the issue of short selling has become a hot topic in the security bond markets around the world. Share prices of Adani group companies have fallen massively. The fall in the stock market is said to be due to short selling. Proponents of short selling consider it an essential feature of the securities market. On the other hand, this short selling directly-indirectly creates risk in the market. Opponents of short selling point to the risk of instability.
Emphasis on transparency from IOSCO
The International Organization of Securities Commissions (IOSCO) has also reviewed short selling and securities lending practices in the market. Instead of banning it, it is recommended to bring transparency in short selling. According to media reports, some US attorneys in 2022 considered investigating allegations of fraud in a broader investigation into hedge funds and research firms that have taken a stance against stocks. Accordingly, it was reported that the US Department of Justice has also examined some of the documents.
Short selling continues from Hindenburg
Research firm Hindenburg also admitted to short selling against Adani group companies. Hindenburg was said to be taking advantage of the ongoing fall in the Adani Group's share price. Hindenburg raised a question mark on the Adani Group in its research report. Adani Group companies' share prices were claimed to be overvalued by more than 85 percent. In its report, Hindenburg had alleged that the Adani Group was involved in fraud and that the share prices had been inflated excessively.
The Adani group denied Hindenburg's allegations
The Adani Group has denied the allegations by research firm Hindenburg saying that the allegations leveled against the Adani Group were baseless and no information was hidden by the Adani Group.
What is Short Selling?
To sell a share of a company in the stock market, you need to own that share and then you can sell that share price after the price increases. However, in short selling, the investor can sell the shares he does not own first. Then they can buy that share after its price falls. The difference in this transaction is his profit. For example, an investor buys a share of a company for Rs.50. He then sells after it reaches Rs 70. In this, the investor got a profit of Rs.20. So, while short selling, an investor sells a share of a company at Rs 70 already without buying it. Then the share price falls to Rs 20 and the investor buys it. It can be said that he made a profit of Rs 50 in this transaction.