Securities and Exchange Board of India also reiterated that the deadline to comply with the Clause 49 of the listing agreement would not be extended beyond December 31 next and warned tough action against companies that "step out" of the rules.
Speaking at the 33rd National Convention of Company Secretaries in Chennai, SEBI chairman M Damodaran said short selling by institutions would be allowed before the end of the this calendar year. Currently, only individuals can short sell. In other markets, institutions are allowed short sale of equities.
"A dichotomy exists in India. We will remove that," he said, adding that other steps such as securities lending and borrowing and physical settlement of transactions, instead of cash settlement, would also be implemented simultaneously.
Damodaran said SEBI would also bring all the mutual fund intermediaries, including agents and brokers, under its regulatory ambit to protect the interests of investors. Already, some mutual funds have removed some agents from their list following the SEBI move, he pointed out.
SEBI would also shorten the timeline for companies to raise funds from the domestic markets through the IPO without "lowering the bar" or diluting the existing regulations, he said.
At present, companies spend considerable amount of time from the date of filing the document to the actual raising of funds. "We will shorten the timeline."
On the derivatives market, Damodaran said the position limit would be increased to make both futures and options popular. "There are position limits that are presently prescribed. These are at lower levels," he said.
In India, single stock futures had become very popular instrument. "We are the largest single stock futures market in the world (at) the NSE. Because of that we are not leaving anything for those who want to write options," Damodaran said, adding that this was the main reason for the trading in options and index futures not picking up in India.
A SEBI committee was working on prescribing separate limits for these derivatives instruments and it was expected to come out with the suggestions next month, he said.
On the Indian regulatory framework, he said there were 30 principles by which the International Organisation of Securities Commissions judges the health of capital markets. India was fully compliant with 25 of these principles, Damodaran said.
In April 2007, when India hosts the IOSCO General Assembly at Mumbai, the country would comply with "at least" 30 principles and "we hope to add a few more principles," he said. About 180 securities regulators from across the globe are expected to participate in the Mumbai IOSCO general assembly, the SEBI chief said.