The finance minister described activist short selling as the practice of strategic intervention by individuals or institutions to alter the value of a target company. Those who engage in short selling are often careful to devalue the company. Profits are reaped when the company recovers from a downturn. This is a method that can bring significant profits to the companies involved in short selling.
The finance minister also clarified that there are different definitions and approaches to short selling. Recent developments in the financial sector, including the Hindenburg Report on the Adani Group and an upcoming report by another investigative agency, have fueled the debate on activist short-selling and its impact. In this context, in an interview given to the Economic Times, the Finance Minister talked about short selling.
What do short sellers do?
Short sellers study their strategies by closely analyzing corporate entities. Assesses profit potential as well as predicts downside potential.
Some aim to exploit companies for profit while others seek to capitalize on market fluctuations. Nirmala Sitharaman pointed out SEBI’s role in identifying the current concerns raised by such activities amid these complexities. The Finance Minister emphasized the importance of SEBI monitoring the market activities in India.
