My voice your vote

Just yesterday I was reading a very nice article, I think on Traderji itself, written by (hold your breath) the Big Bull Harshad Mehta, about the Indian Stock Markets.

The article was dated back in the 1997. In this article Mr. Mehta talked in length about the badla system and how it was hurting the Indian Stock Markets.
He goes ahead, in this article, to point out that the brokers shorted the markets to earn interest and so on... He explains the entire badla system in details.

1997 were the days where making money was considered a crime and that every time a stock would move up 5-10% the brokers would simply short the stock with the assumption that it just has to come down, and hence make money.
As per Mr. Mehta, Due to the nature of the badla system and the flaws attached to it the "Badla" infact seemed to incentives the pessimist.

In conclusion, he advocated to get rid of the disease called badla, and so did we.

Though, shorting is allowed today also. And here is my concern.

I once shorted a stock and could not square-off in the day, unfortunately the stock was in the up trend.
When after a couple of days I realized what had happened, the soil below my feet’s got loose.
I was charged some exorbitant amount as penalty, of the entire trade value. That left my account almost 2/3 of what it was.

I am sure this would have happened to you too. If not, now you know what happens when you short and don’t close the position on the same day.

What is our current system trying to do? It is penalizing the trader for being pessimistic?
And well, for all practical purposes me might not even be pessimistic, he would just be trading with the trend.

The times have changed; do you really think brokers today have the power to do what they want?
How much, today, do you depend on your broker for your trading? or even for calls/tips for that matter? So the broker’s issue is out.

Today we run forums like Traderji, discuss, debate, identify, scrutinize and then make 'aware' trades. So we know what we are doing. We trade with the trend and are not "pessimistic".

And what about the infrastructure? The poor guy would be just running tough on luck. The countries infrastructure would have incapacitated him to square off his position in the last few minutes of the trade. The phone lines could be not working. The power tripped off or maybe a load shedding, who knows!

Or it could just be un-intentional just an accident or ignorance/unawareness (like myself).

All in all, should this penalizing of shorting be rationalized?

Regards

This will only increase volatility and more emphasis to FII's. Still they want the invstors to be more inclined towards Equity. why? To be just a prey. huh..........

Shorting in shares should be allowed and restricted to Retail Segment. I have identified Infosys as great Short, when it was ruling at 2300+. I didnot want to play in Futures, so had to keep quite.

I touched a low of 2050, a cool profit of 250. Not a bad option.

They should allow shorting, healthy for markets and in long run it will create more insecurity among big player and market will stabilized.

Satya

Just to add my two cents to what has already been voiced here. Option trading in India should develop further. I mean option trading of stocks (not only indices) should be more vibrant and should be more liquid. Long period options (say 6 month options, yearly options etc. as in Wall Street) should be introduced and more options should be traded even of the exisitng stock contracts.