Small and mid-sized funds have seen high inflows, causing concern among authorities about how they would hold up in the event of a sharp market selloff. The Securities & Exchange Board of India (SEBI) has also been reviewing stress tests conducted by such funds, sources have previously said.
The regulator’s recent circular gave institutions permission to short stocks and proposed a borrowing & lending scheme to facilitate this. But requiring institutions to disclose their short trades upfront will leave them vulnerable to short squeezes.
Sebi has recently streamlined the process of granting accreditation to investors. The circular states that the accreditation agencies will give their approval only on the basis of KYC and the financial information of applicants.