Short Sales means Sale of a Share that the seller does not own at the time of Sale. There can be Short Sales in Delivery Market or Future/options (Derivative) market. We in this article will discuss Short Sales in the case of Delivery Market i.e. where actual transaction of purchase and Sales happen.
Speculation: In the Speculation that He Can Purchase Share at Low Price (Future Time) Then Sales Price (at present) and makes Profit. (see example below).
In India, Time to Buy Shares to close Short Sales in Delivery Market is One Day. (Also called Intra Day Transactions) i.e. One has to Purchase Shares Same Day and settle the Short Sales Transaction as in India Naked Short Sales not allowed
Intra Day Transactions: This means you are doing a transaction without having substance or only for speculation purposes. For instance, you are purchasing Shares without having money or Selling Shares without having shares in Hand. The time window for settling these transactions is One Day i.e If you have purchased Shares without having Fund then you have to Sale the shares same day evening and vice versa.
For Example, In the morning Mr. FG Sold Share at Rs.100, which He Purchased in Evening at Rs 95. So he made a profit of Rs.5. If the purchase price would have become 105 in evening, then he would have made loss ofRs.5
In India, before 2007 only retail investors were allowed to do Short Sales, Now Institutional Investors including Mutual Funds are allowed.
All Stocks are allowed for Intra Day Trading, except they are marked under BE/BT category by BSE/NSE.
Margin Money required in Intra Day Transactions: Margin money is required to do Intra Day transactions as prescribed by SEBI. It is not uniform across shares, it is dependent on multiple factors like it is covered in F&O market, volatility etc.