Short Delivery query

If I sell a stock on T+2 morning, is there still a chance of short delivery, since settlement usually happens on T+2 evening?

Another query is, while taking a swing trade in small cap stocks with not great volumes, if target is touched on T+1 itself, what should be the best course of action? Since btst might risk a short delivery.

Yes.

Suppose, I buy a stock on Monday(T).
Sell it on Wednesday(T+2) morning.
I get short delivery.
Now, I should be getting delivery of the stock on Thursday evening after the auction.
According to T+2 settlement process, I only have to deliver the shares on Friday.
So how will there be a possibility of auction penalty? If you can please clarify. @ShubhS9

Someone please clear my confusion.

Hey please go through this article. It has a detailed explanation of short delivery and its consequences with various scenarios that play out in the auction market. The answer to your question lies in this article and then some.