"I have not committed a crime. What I did was fail to comply with the law." -- Former New York Mayor David Dinkins
So if you are not abiding the law or at least not knowing the directions of the law, you are committing some crime. What's the result of a crime, some punishment? What is happening now is governments all over the world are indicating that shorting is not a good idea for anybody at this point. Didn't we hear US SEC ban shorts for some days? Didn't we read about Karachi Stock Exchange announcing support prices for stocks? It has all happened very recently, not even 3 months back! Governments have always tried to support markets when the crash is so untimely (in their view). India is not really different in that aspect too. Our markets have crashed more than Dow Jones did and Indian government has been very quick to improve sentiment. RBI has cut its benchmark rates and ratios (CRR, SLR and Repo) so many times in the last 2 months. Just 4 months back we were fighting with inflation and now we are fighting with liquidity, times have really changed. SEBI is also not behind in regulating, they have changed the circuit rules (I view them as bullish, why?Read !), they have allowed promoters to do creeping acquisitions beyond 55% up to 75%, provided they buy from open market, that even not through bulk deals (source). SEBI has been time and again cautioning FIIs about stopping overseas lending of securities. It released the list of shorts also just 2-3 days back, saying openly which scrips FIIs are short in. On 29 October, 2008 FM meets RBI and SEBI chiefs and on 1 November, we see all CRR, SLR and Repo being cut through a single announcement. Yes, it is not a perfect co-relation, but it does convey a message that SEBI, Government and RBI are resolving the issues of financial markets collectively. May be we will see fuel price cuts also happening in near future. And when all these forces are indicating bullish behavior, are shorts committing a crime here!
A quote by Peter Lynch "I've found that when the market's going down and you buy funds wisely, at some time in the future, you will be happy. You won't get there by reading, 'Now it's time to buy'." When it is panic, you have to buy your stock at your value. When bad things flow, all news is negative, but tide changes and everything looks positive.