What is Auction and When it happens in NSE Share Market

What is Aution in Nse Share Market ?

Action happens only in Intraday trading in Cash Segment of Indian Nse Stock Market. If any intraday trader thinks that there a bearish trend in the stockmarket and  shorts sells  the shares, but due to any eventuality he forget to buy back the sold shares, before the stockmarket closes. When any trader shorts sells any stock, same time a some other traders  at the other side, buy’s those shares. Brokers  has to give Delivery of this short sold shares in Demat Form to Buyer who has brought those shares.

Generally  short sell intraday traders can’t buyback the sold stocks, when stock hits the  upper circuits. We do not advise, short sell in low volume stocks, penny stocks  and those stocks which are not available in F&o Segment.

Sometimes, intraday traders trade in BTST Call (Buy Today Sell Tomorrow)  i.e.  Intraday Shares Mr. Narendra Kumar Buy 100 Shares  of Blue Dart and Sells same shares in Next Day’s Trading Session, there are chances that this shares may also go for auction in Nse Share market.

Action doesn’t happen in Fno Segment of Share Market because you carry forward the short position till the end of month in f&o segment . So your stocks will never go for auction  in Nse Fno Segment. Auction normally happens only in cash segment of stock Market. If any intraday trader have sold the stock in the nse market and in any circumstances he is not able to provide the delivery in time  in demat form the said sold stock will also go for auction in that market. 

If a Intraday Traders Mr. Rahul Kumar Shorts Sells  100 Shares of Reliance Industries Ltd @ 900 Rs on 9 April 2012 at  09:45 am and he forgets to buy back the same short sold shares of Reliance Industries Ltd by 03:30 pm i.e is the closing market time, the said Reliance Industries Shares shares will go for auction.

How Auction Happens in Stock Market

Only Register Brokers participate in Auction process, If the Auction is successful for buying stocks, brokers has to pay actual action rate, penalty plus whatever the broker’s brokerage charges for that trade. 

If the Auction is not successful, and broker is not able to buy this stock due any reason like stock hits continuously upper circuits in stock market. In this case short sell transaction will be cancelled by the nse stock  exchange and short sold trader has to pay the highest price the stock achieved during the day  but not more than 20% of the opening price of the prior auction day.

If under a circumstances the short sold shares goes down in T+3 on Auction day, Short sellers will not get any benefit or profits from the low price of the stock or rate has gone down for the said stocks.

Generally Auction happens in nse share market in Strong Bullish Trend. It also happens in low volume stocks, penny stocks and stocks that run on rumours in the stock market.