Spurt in volatility due to COVID-19 caused SEBI to step in.

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Buying a stock of a good company with good financial performance and position means that you just have to sit tight and hold on to the stock for a long time
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In response to spurt in volatility to curb the fluctuation, Indian regulator SEBI has come with measures to curb short selling. These measures will be effective for a period of a month starting from 23 March 2020. Measures will be again reviewed and appropriate measures will be taken.

Key highlights:

  1. Revision of Market Wide Position Limit 
  2. Increase in margin for stock in phased manner to minimum of 40%.This is only for the cash segment.
  3. Revised Short and long position limit in index derivatives applicable to  Mutual Funds / FPIs / Trading Members (Proprietary) / Clients  
  4. Flexing of dynamic price bands for F & O stocks

Find out a detailed release here.

Novel coronavirus COVID – 19 have caused havoc across the global economy and stock market. Most of the global stock market are trading in bear territory and are witnessing spurt in volatility.

NIFTY have corrected around 31.90% in a month time and 13.8% in last week amid rising volatility. Last week decline could have been worst as NIFTY saw huge rally on Friday,20 March 2020.NIFTY had gain of 5.83% on Friday.

Controlling short selling meant to propel the market upward in bear scenario. But it takes out tremendous profit opportunities in the bear market. In the bear market, investors can create wealth by selling Short and buying put.

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