Explain the concept of short selling in the stock market.

Short selling is a trading strategy in the stock market where an investor borrows shares of a stock from a broker and sells them on the market with the expectation that the stock price will decline. The investor aims to buy back the shares at a lower price in the future, return them to the broker, and profit from the difference between the selling and buying prices.

To engage in short selling, an investor typically follows these steps:

1. Borrowing: The investor borrows shares from a broker, usually paying a fee or interest for the borrowed shares. The borrowed shares are then sold on the market.

2. Selling: The investor sells the borrowed shares at the current market price, generating cash from the sale.

3. Waiting: The investor waits for the stock price to decrease, as they anticipate. If the stock price does decline, the investor can buy back the shares at a lower price.

4. Buying back: Once the stock price has fallen, the investor repurchases the shares from the market. The purchased shares are returned to the broker to close the borrowing transaction.

5. Profiting: If the investor successfully buys back the shares at a lower price, they make a profit from the difference between the selling price and the buying price, minus any borrowing fees or interest paid.

Short selling can be a risky strategy as it involves betting against the market and exposes the investor to potential losses if the stock price rises instead of falling. It is often used by experienced traders and institutional investors to hedge their portfolios or speculate on declining stock prices. Short selling also plays a crucial role in price discovery and market efficiency by providing liquidity and allowing investors to express their negative views on specific stocks or the overall market.