Short sellers -- banned since September to prevent volatility and pare losses -- re-entered the market on Monday, as indexes fell on lower oil prices and weaknesses in global markets. The MICEX fell by 5.3 percent, while the dollar-denominated RTS Index was off by 4.4 percent.
Urals crude, the country's main export blend, slipped $1.29 to $69.33 on a stronger U.S. dollar.
Analysts and market participants welcomed the end of the ban, saying it was reflected on financial markets and would create more favorable trading conditions.
Short selling can "certainly lead to increased volatility and can definitely push certain stocks down," UralSib chief economist Vladimir Tikhomirov said. "But not allowing it at all runs counter to free-market strategy.
"The general perception is that the market has reached a level of stability, unlike last fall, when it looked like the bottom was ready to fall out."
Under the current regulation, traders cannot short a stock that is more than 3 percent lower than the pervious day's closing price. Before the ban, the level was 5 percent.
The service also reinstituted margin trading, allowing traders to take 3-to-1 positions on credit.
Traders said Monday's losses had little to do with short selling and more to do with broader economic concerns.
"The dollar was strong today, and oil was down," said Andrei Cook, a senior trader at UralSib. "The market was ready to fall, and short selling might have added a little fuel to the fire, but not very much."
Cook did say, however, that the stellar growth of the last three months -- when the MICEX nearly doubled in value from 646.72 on March 3 to as high as 1,206.20 on June 1 -- is unlikely to continue in the near term.
"You won't see much more growth in prices without significant changes in economic fundamentals," he said. "We're probably due for a correction but not a major trend reversal."
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