October 2025

Short selling, or "shorting," lets investors make money when stock prices go down. They do this by borrowing shares, selling them for a high price, and then buying them back for a low price to return them. India's market, worth more than $5 trillion, is seeing more interest in hedging as global events cause prices to change. This article looks at potential strategies for retail investors. How Short Selling Works in India In India, short selling is allowed in the Futures and Options (F&O) market, however it is not authorized for delivery-based trading. In the cash market, this means you can't sell shares you don't own and keep the position open indefinitely. India’s Regulatory Landscape for Short-Selling In March 2025, the Securities and Exchange Board of India (SEBI) changed its rules on short selling. The revised rule allow both individual and institutional investors to participate. However, it banned naked shorting (selling without borrowing intent).Retail traders can only short equities that are eligible for F&O, and they have to report any uncovered positions at the end of the day to make sure everything is transparent. In the cash market, shorts only last for one day, while derivatives let you hold them for more than one day. Exchanges like NSE and BSE disclose weekly short-sell data, and if you don't follow the rules, you could lose up to 20% of your money. How to Short Sell In India Shorting futures contracts Futures are the easiest way to short long-term because you can hold your holdings until they expire each month. You can roll over to the following contract to keep your exposure longer, like stocks going down without actually getting the goods. Steps: Get a broker to open a demat account that supports F&O. Do your analysis using technicals like bearish candlesticks or RSI overbought signals, or fundamentals like high debt ratios on companies like Reliance or HDFC Bank futures. Choose the contract (current or far-month for a longer time frame) and the lot size. At your entry price, place a sell order and block margins. Keep an eye on daily mark-to-market settlements. Get out by buying back or rolling over before the expiry.2. Using futures contracts to short stocks for a long time Stock futures are the easiest approach to short a stock for a lengthy time in India. Futures contracts let people sell a stock now for a date in the future, usually one, two, or three months from now. Futures contracts end every month, but traders can roll over their positions by closing the old contract and initiating a new one for the next month. For instance, if you think a company's stock will go down over the next six months, you can keep rolling over short positions every month. But this means paying rollover fees and margin requirements, which can pile up over time. 3. Securities Lending and Borrowing (SLB) For long-term shorts that act like cash, utilize SLB to borrow shares altogether. This lets you execute transactions that last longer than a day. Steps:• Get to SLB through NSE/BSE brokers like Angel One. • Borrow stocks that are on the F&O list through weekly auctions, paying 0.5% to 2% in annual fees.• Sell borrowed shares in the cash market.• Hold short: You can buy back at any moment to return and make money on dips.• Settle: Return shares and fees/dividends. 4. Shorting Through Exchange-Traded Funds (ETFs) Some exchange-traded funds (ETFs) in India are inverse, or bearish, meaning they move in the opposite direction of the benchmark index. These aren't available for individual equities, but they do let investors keep short positions on the whole market for longer periods of time. You can buy these ETFs and keep them in your demat account just like you would with conventional stocks. In conclusion Investors can't short stocks directly in India's cash market for long periods of time, but they can utilize futures, options, and ETFs to keep their negative exposure in check. Derivatives enable long-term shorting in India, allowing for bearish bets in a market where bulls typically reign.SEBI's regulations have made it easier for everyone to use products like futures and puts, but you need to do your homework and be disciplined to be successful. Remember, you shouldn't short hedges without knowing what you're doing. How can I short stocks in India? In India, you can short stocks using futures, put options, or SLB. The processing involves opening F&O account, analyzing stocks, selling contracts, and managing margins under SEBI rules. What risks come when you short for a long time? Risks of long-term shorting include unlimited losses, margin calls, high costs, and volatility. Use stop-losses and diversify to manage exposure. Are there ETFs for shorting the Indian market? Yes, inverse or bearish ETFs allow investors to profit from falling markets by moving opposite to indices like Nifty or Sensex and can be held long-term.