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7 July 2026

SEBI plans to ease short selling

SEBI is a statutory regulatory body and its policy decisions regarding market reforms and financial instruments are directly relevant to the GS3 syllabus on Indian economy and resource mobilization.

1 min read 2 questions 1 prelims

Notes

  • SEBI plans to ease short selling by doubling the number of shares eligible for Securities Lending and Borrowing (SLB).
  • The initiative aims to boost the cash equities market and shift investor focus from the derivatives market to cash segments.
  • Currently, only 176 out of approximately 2,600 companies listed on the National Stock Exchange (NSE) are eligible for lending and borrowing.
  • Eligibility criteria for stocks include liquidity, trading volume, and capacity to support derivatives exposure.
  • Current thresholds require an average monthly trading turnover of at least ₹1 billion over the previous six months and a minimum market-wide derivatives exposure of ₹1 billion.
  • SEBI is considering relaxing these specific eligibility thresholds to include a majority of liquid shares.
  • The move also involves reducing collateral requirements for investors.
  • Historical context: Strict requirements for the cash equities market were implemented following past stock market scandals, with tightening phases in the early 2000s and between 2017-2020.

Questions

  1. Discuss the rationale behind SEBI's proposal to ease short-selling regulations in the Indian cash equities market. How might this shift impact the risk profile of retail investors compared to the derivatives market? 150 words
    Attempt this — 150 words in 8 min
    0 / 150 words 8:00
  2. The Indian capital market has historically prioritized strict regulatory oversight to prevent systemic risks. In light of SEBI's recent move to liberalize short-selling, analyze the balance between ensuring market liquidity and maintaining robust investor protection mechanisms. 250 words
    Attempt this — 250 words in 11 min
    0 / 250 words 11:00

Prelims

  1. Which of the following criteria is currently used by SEBI to determine the eligibility of a stock for Securities Lending and Borrowing (SLB)?

Syllabus

Topics

Sources

250words.in · https://250words.in/daily/2026-07-07/sebi-plans-to-ease-short-selling