The Securities and Exchange Board of India is proposing to lift restrictions that bar institutional investors from short selling, "to enable a level playing field for all classes of investors," according to a SEBI statement. SEBI, which has submitted the proposal to public comment, would allow short selling by institutional investors, but only in stocks that have derivative products available. Read on.

In addition, SEBI would not permit naked short selling, forbidding institutional investors "to do day-trading, i.e. square off their transactions intra-day." Also, all transactions would be grossed for institutional investors at the custodians' level, institutions would have to fulfill their obligations on a gross basis, and custodians would continue to settle their deliveries on a net basis with the stock exchanges. Comment period ends Jan. 20.