When you short sell in Intraday (sell first, buy back later the same day), the position has to be bought back before the market closes. If it can't be — most often because the stock is stuck at its upper circuit with no sellers to buy from — you've sold shares you don't own and can't deliver. This is a short delivery, and it's settled through an exchange auction.
Why does a short delivery happen?
An Intraday short is closed by buying the shares back. If the stock has hit its upper price limit (upper circuit), there may be no sellers at that price, so the buy-back order can't be filled — not by you, and not by the system's end-of-day auto square-off. The sell obligation then goes to settlement with no shares to deliver.
What should I know about it?
- A short delivery is settled by an exchange auction the next trading day, and it can cost more than the price you sold at. See how the auction process works, what it costs you, and what happens to your funds while the short is open.
- Covering the short is ultimately your responsibility — though our RMS team makes a best-effort attempt to help.
- Short selling is only allowed as an Intraday trade — you can't carry a short forward to deliver later.
- A short delivery can even happen without any mistake on your part, so it's worth staying vigilant around settlement.
- The reverse case exists too: an Intraday buy that can't be sold (stuck at the lower circuit) results in a forced delivery instead.
How do I avoid a short delivery?
- Square off your short position yourself, well before the close — don't rely on the auto square-off for a short, especially in a fast-moving stock.
- Be cautious short selling stocks that can hit the upper circuit (low-liquidity or momentum names), where a buy-back may not be possible.
- Respond quickly if our RMS team reaches out to help you place a stop-loss.