what is short selling in terms of shares and what is T+2 settelement????????
CIAO
rinku
To say in brief, short-selling means "you are selling shares which doesn't belong to you". Broker will get those shares from pepl who are trading on margin.. ( i.e who bought those shares with lended broker's money. So, it is a property of the broker eventhough you bought it). You can sell these shares in the market and get money.
Why would someone do 'short-selling' ?Ans: If you think that the price of the stock will go down in a few hours/days..(mebbe the VP or CEO called you up saying that company is closing business to open a dhaaba
). So, you sell shares at the current high price to book profit. You get these shares from your broker for a shortsell which he sells and adds money/securities to your acct.
How will you pay back shares whatever you have lended ?Ans: Now that company is closed and its CEO is now smashing mosquitoes.. :grab: you can buy the shares at a lower price from the market, and return them to your broker.. i.e you sold at Rs.70 and bought it back at Rs.30. You gained Rs.40.
This is called 'Buy to Cover'. A 'buy to cover' order means, it will cover the short-sell which has been done for the *same share*. I am not sure whether our brokers allows you to buy-cover shares of another company for same amount.
Why should a brokerage firm allow short-selling ?Ans: The firm gets commission for both trades.. for short-sale and buy-to-cover order. It allows the customer to leverage the shares which would have left untouched.. So, more volatility in the market.. Hence, SEBI or SEC also allows such trading..
Are things so rosy. Why dont everyone do 'short-selling' all the time ?Ans: Suppose, you thot that whatever the CEO said was true, and short-sold the share at current price of Rs.20. Actually, he was your enemy
and company declared profits, new re-investments leading to share price rocketing to Rs.90. When broker asks to cover the short-sale you have to make up the extra 70/- per share from your pocket
and buy from the market to return the debt.
It doesn't matter if you are holding only 10-20 shares.. but it matters when you are holding 1000 shares.. It means, a loss of Rs.70,000 ...
.. Just imagine the loss of FIIs who trades in millions of shares..
.. So, theres always a high risk with short-selling..
T+2 settlement means 'it takes 2 *business days* from the trade date for the trade to clear, transfer the monies between the two customer accounts ( buy and sell sides ) and also transfer of securities.. On T+2, either the shares are in your name, or else the money is in your account for a sell. This is from a customer-point of view..
From a broker's position, they have a concept of continous net settlement where their position and balances are tallied for a whole day w.r.t the exchange. But, that is a different arena which we never have to bother..
Hope this helps.. !!
Cheers,
T'Blazer.
and company declared profits, new re-investments leading to share price rocketing to Rs.90. When broker asks to cover the short-sale you have to make up the extra 70/- per share from your pocket 
and buy from the market to return the debt.
.. Just imagine the loss of FIIs who trades in millions of shares..