What will happen on delivery date if I have short position on futures (held till expiry) and long position in equity delivery of same stock equal number of shares?
And will margin requirement change daily for futures short position which is covered by long in equity delivery?
As you are Short Futures, upon expiry you will have to deliver underlying shares, as you already have the underlying shares, same will be debited from your Demat account to fulfill the physical settlement obligation. You can learn more on physical settlement here.
The SPAN + Exposure margin is dynamic and keeps changes according to volatility and price, the margin requirment will keep changing even if you hold underlying shares.
Dynamic margin requirement, even if holding the underlying seems unjust.