Come February 1, the stock market would witness big players making short sales. Market regulator Sebi said it would allow institutional investors to start short-selling from February 1, which was banned in 2001 following of Ketan Parekh scam.

The market regulator has already given its approval and also put in place a stock lending and borrowing mechanism to facilitate short selling. As no naked short sales will be allowed, such deals should result in delivery at the end of the settlement. With the RBI giving its nod to FIIs for short selling, Sebi will allow it for all institutional investors from February 1, Sebi chairman M Damodaran told reporters on the sidelines of a conference on Corporate Governance in New Delhi.

It will be for all institutional investors — both FIIs and domestic ones like mutual funds, Damodaran said. Retailers are already allowed to short-sell, that is selling shares which sellers do not own.

Damodaran’s comments came a day after the Reserve Bank allowed foreign institutional investors and their sub-accounts to short-sell shares. Investors short-sell when they think that prices are high and will come down in future.