InvestorQ : Is it possible that the exchanges may be shut down and that short selling may be banned in India for some time?
Anjana Aiyar made post

Is it possible that the exchanges may be shut down and that short selling may be banned in India for some time?

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Arya Nanda answered.
1 year ago
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These kinds of ideas have been discussed before and I am not too sure if it will work. Currently, market tumbles 3-5% on a daily basis. However, there is no assurance that if you bank short selling or shut stock exchanges, it could halt the bear rally. It could just resume once the markets open. Similarly, banning short selling also doesn't seem to solve any problem. Short-sellers organically reduce volatility in the markets as they book profits when markets slip, leading to some form of buying in a falling market. Short selling is also positive in the sense that it indulges in short covering and that provides a support to the stock. Globally, the experience has been that if you ban short selling, it only results in delivery selling and sharpens the fall in the market. It happened in Europe when they tried such an experiment in Europe. Such experiments are best avoided.

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