Damodaran said the guidelines were almost finalised and just a few formalities were left.

The market watchdog at its board meeting on March 22 had approved a proposal to allow short-selling by both domestic and foreign institutional investors. The decision followed an announcement by the finance minister in his Budget speech. Previously, a Sebiappointed secondary Market Advisory Committee had also recommended short-selling by institutional investors. This facility is currently available to retail investors. Short-selling is just one of the various trading facilities available in other global markets and there have been demands for it by foreign investors in India as well, the Sebi chief said. The prevailing belief globally is that short-selling stabilises market in times of volatility, even though some counter-views say that it adds to volatility, he added.

Analysts believe the introduction is likely to benefit the market in more ways than one. Apart from improving efficiency and liquidity, it will also help increase participation in a falling market since institutions will try to take advantage of such a market by going short, thus improving the market depth. "I do not see any problems due to short-selling. Ours is a mature market... in fact, we need more products for further growth of the capital market and short-selling would aide to the growth," Damodaran said.