I’m well aware of short selling pitfalls for the seller side… e.g. auction penalty, interest charges etc.
But I want to know, since the buyer did not do anything wrong, are there still cases when he suffers for no fault?
For example, what happens in case of corporate actions? E.g. if I buy shares of ITC on 3rd Jan (just before ex-demerger date), but the shares are short delivered, will I miss out on the shares of the demerged entity? Same question, what happens if it was dividend or a bonus issue instead of demerger?
Stock is never in your demat account so yes, you won’t take part in any corporate actions. Whoever has the shares on record dates will take part in corporate actions.
In cases of securities having corporate actions and no ‘no-delivery period’ for the corporate action, all cases of short delivery of cum transactions which cannot be auctioned on cum basis or where the cum basis auction pay out is after the book closure / record date, would be compulsory closed out at higher of 10% above the official closing price on the auction day or the highest traded price from first trading day of the settlement till the auction day.