The ban on short sales imposed by the Securities & Exchange Board of India should be made permanent if the market were to be saved from falling prey to speculators, SBI Capital Markets Ltd managing director A R Barwe warned yesterday.
"Short sales should be banned permanently to ensure that the market is not taken over by speculative forces. The ban imposed by Sebi was essential in view of the prevailing market condition. In any case, if such trading is banned for institutions, why allow them for others," Barwe told Business Standard yesterday.
Sebi yesterday announced that the ban would be lifted from July 6 and an additional margin system would be put in place to tackle undue volatility.
Asked whether even the modified carry-forward was not a safe system, Barwe said: "The safest system is one under which every trade results in delivery. What kind of market you have when 90 per cent of the transactions do not result in delivery, which is what was happening."
Commenting on the state of the market, Barwe said it had hit the bottom and would not fall any further. "Foreign institutional investors are unlikely to press any distress sales. At this level, there would be more buyers than sellers," he said.
The Bombay Stock Exchange Sensitive Index rose 65 points yesterday on sustained buying support from operators coupled with fresh purchases by foreign funds and domestic institutions.
Asked what measures he expected from the government to revive the capital markets, in view of the disappointing budget, Barwe said he was counting on buy-back of shares by corporates being allowed. "It appears to be very much on the cards. This is the measure everybody has been waiting for," he said.
The other measure on Barwe's wish list is waiver of capital gains tax on share transactions. However, he said it was unlikely that this step would be taken in the near future.
