Scenario 1: Stock Hits an Upper Circuit

Suppose you have short-sold 100 shares of Reliance in intraday (Product code: MIS), expecting the price to decrease during the trading day to make a profit. However, due to market volatility, the stock price rises sharply and hits the upper circuit. When a stock hits the upper circuit, no sellers are available.

As a short seller, you are required to buy back 100 shares of Reliance to close your position. However, buying will not be possible unless the circuit limit is released. If the circuit is not released during the day, you will be forced to carry the short position.

Since the short position could not be closed during the trading day, you will be required to deliver 100 shares to the buyer on T+1. Failure to do so will result in the shares being considered as short delivered.

Scenario 2: Buy Today, Sell Tomorrow (BTST)

You purchase 100 shares of Reliance at ₹1,000 per share (Product code: CNC) on Monday, anticipating a short-term price increase. As expected, the stock price rises to ₹1,050 on the next trading day (Tuesday). To capitalize on the profit, you sell the 100 shares of Reliance at ₹1,050, earning a profit of ₹(1,050 – 1,000) × 100 = ₹5,000.

Ideally, this transaction should proceed smoothly as per the Rolling Settlement Cycle. The 100 shares of Reliance that you purchased on Monday will be credited to your Demat account on Tuesday. Stocko will then use these 100 shares from your Demat account to complete the pay-in process with the exchange on Wednesday.

• Monday: You purchase 100 shares.
• Tuesday: You sell 100 shares.
• Tuesday: The 100 shares are credited to your Demat account.
• Wednesday: The broker uses the 100 shares from your Demat account to complete the pay-in process with the exchange.

The completion of the entire settlement cycle assumes that you will receive the full quantity of 100 shares in your Demat account on Tuesday. However, there is a possibility that the seller who sold you the shares on Monday fails to deliver them (Scenario 1). In such a case, you will not receive any shares in your Demat account on Tuesday. Consequently, Stocko will not have the required shares for pay-in to the exchange on Wednesday, resulting in a short delivery of 100 shares.