If you sell shares which are not in your Demat Account, the transaction results in Short Delivery and further goes into Exchange Auction
Ideally you would not want to sell shares which are not in your Demat Account. Here are some scenarios in which you can get into such a situation:
> When do a BTST (Buy Today Sell Tomorrow), your sell transaction could result in Short delivery if you the shares bought by you the previous day is not delivered by the Exchange
> When sell shares using NRML Margin with an intention of buying back before the close of the Market and end up not closing the position. This could be because you forgot to close the position or it could be because the Stock price has hit the upper circuit. Note that if you had sold using MIS product, we take best efforts to close the position 15 minutes before the close of the market.
Here is what happens in your account:
T+1 Day : The Base capital will be blocked to the tune of 150% of the Sales value for which you did not have stock in your Demat Account.
T + 2 Day : Provisional Debit entry to the tune of 150% of the Sale value (Sale Value + 50% of Sale Value) for which you did not have stock in your Demat Account will be passed in the ledger with the narration reading as " AUCTION ADDBACK FOR SHORT-DELIVERY "
T + 3 Day: The Provisional Debit entry will be reversed and the actual Auction Obligation received from exchange will be debited to the account. Also an auction penalty of 1% of the Auction Obligation value will be debited in the ledger
How is Auction Obligation calculated: The auction price is taken at the lowest price offered in the Auction. The highest price would be not more than 20% and not less than 20% of the closing price of the T+1 day i.e. the previous day prior to settlement day.