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MARKET MATTERS: The SEBI Chairman, Mr M. Damodaran (left), with the Chairman, FPSB India, Mr Shailesh Haribhakti, at the Financial Planning Congress 2007 in the Capital on Thursday. - Ramesh Sharma

New Delhi Jun 21 Institutional investors would soon get to short sell shares settled by delivery in the Indian stock exchanges. The Securities and Exchange Board of India (SEBI) Chairman, Mr M. Damodaran, gave an indication to this effect here today.

Although the SEBI board had on March 22 given its nod for short-selling by institutional investors, both domestic and foreign, the guidelines for short-selling have so far not been issued.

"Short-selling by institutions will soon be allowed," Mr Damodaran told reporters on the sidelines of Financial Planning Congress 2007, organised by the Financial Planning Standards Board India.

The Finance Minister, Mr P Chidambaram, had said in his Budget speech that institutional investors would be allowed short selling settled by delivery, and also securities lending and borrowing to facilitate delivery.

Meanwhile, Mr Damodaran also said that he expected the Investor Protection Fund (IPF) to be in place by next month.

"We need a Board decision to set up this fund. The Board will consider this at its meeting on June 30", he added.

Asked whether the setting up of IPF would require an amendment to the SEBI Act 1992, Mr Damaodaran said an amendment was not necessary for setting up of the fund, but would be required if the fines and penalties levied by SEBI have to be parked into the investor protection fund.

Currently, the fines and penalties levied by SEBI go into the Consolidated Fund of India.

The SEBI Chairman noted that the IPF could be set up without any amendment to SEBI Act if the funding were to come from sources other than levies and penalties (for example donations).

Asked as to how SEBI's IPF would be better than the Investor Education and Protection Fund (IEPF) of the Ministry of Company Affairs, Mr Damodaran said SEBI would work closely with the State Governments and there would be a wider reach and coverage than the case now.

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