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What is short delivery and what are its consequences?

A short delivery happens when the exchange is unable to deliver shares you purchased to your demat account because the seller of the shares failed to do so.

When will I get my stocks after a short delivery?

The stock will appear in your account on T+4 day after the exchange holds an auction T+2 day to procure short delivered shares and credit them to your demat account on T+3 day.

If the exchange is unable to procure the shares in the auction, your trading account will be credited with cash on the basis of close-out price. See Cash settlement for closing out positions.

In the case of physical settlement of F&O contracts where the seller fails to deliver stocks to the exchange, the exchange conducts an auction on T+3 day and the settlement time will be on T+4 day. See Physical settlement of derivatives.

Why does it happen?

Short delivery happens when the seller (on the other side of your buy trade) fails to deliver the shares to the exchange to be credited to your demat account. This typically happens when intraday short positions can not be closed due to illiquidity or due to stocks hitting an upper circuit.

How do I know if my shares have been short delivered?

Whenever a short delivery happens, you will be notified through an email and a Kite notification. A Short Delivery tag will be also displayed in your holdings beside the short delivered stock.

Kite Web

Kite Mobile

Example scenario

  1. Shares are purchased on Monday (T day). The shares will be tagged as T1 holdings on your account until T+2 day, which is a Wednesday.
  2. On Wednesday, if shares haven't been delivered to your account, the Short delivery tag will be visible on T+3 day (Thursday) and your PnL will be updated on T+4.
    On Kite web, hovering on the tag will display the short delivered quantity.
    On Kite app, tapping on the stock displays the short delivered quantity.
  3. Once the stock exchange delivers the shares on Thursday (T+3 day), the shares will appear in your account on the next trading day, that is, Friday.

Did you know? The only way to avoid short delivery and auction penalty for the seller is to transfer the shares from another demat to the seller's demat account. Buying the shares on the exchange will not avoid short delivery and auction penalty because of the time taken for the shares to be settled, i.e. T+2. To know more, See What does settlement cycle mean?