Choksi said “GROWW shares saw over 3 million units auctioned on NSE,” calling it an indication that “many traders shorted the stock but failed to deliver it in time for settlement.” According to him, these traders “sold shares they didn’t own, betting that the stock would go down. But it didn’t. And now, the stock exchange is crying out for them.”
Grove’s stock, which climbed nearly 90% after listing, hit a 10% lower circuit on Wednesday, the first meaningful pullback after weeks of relentless gains. But the real drama played out behind the scenes as thousands of short sellers scrambled and failed to secure shares for delivery.
Auction of GROWW shares on NSE saw more than 30 lakh units.
What does this mean?That means many traders shorted the stock but failed to deliver it in time for settlement.
They sold shares they didn’t own, betting that the stock would fall
But it didn’t.
And now, the stock exchange is… pic.twitter.com/71FLgOPSUg– Abhijit Chokshi | Investor’s Friend (@stockifiabhijit) November 19, 2025
Grove Auction Trap
Explaining the process, Choksi described the auction as a “punishment window for failed promises” and said, “You said you would deliver the shares. You didn’t. Now the exchange moves to fix the mess. And pays you for it.”
Choksi reminded traders that under India’s T+1 regime, “if you sell a stock today (T), you have to deliver that stock tomorrow (T+1).” However, many continue to short-sell intraday in the hope of buying back shares at cheap levels before the market closes. When that fails, the exchange intervenes the next day.
As Chokshi noted, “The exchange conducts a separate buy-in auction the next day. It tries to buy the same number of shares that you failed to deliver and gives it to the buyer who was expecting it.” The price discovered in this auction becomes the responsibility of the merchant. “You will have to pay whatever price the auction settles on… 20% or a penalty of up to Rs 1 lakh, whichever is higher.”
An investment advisor explained his results with an example: Shorting 1,000 Grove shares at Rs 100, the shares cost Rs. 140 to fail to buy back, and then Rs. 160 to face the auction price. “You pay Rs 160,000 for the shares you sold.
What caused the settlement storm in Grove shares?
Choksi said the 3 million-share auction “tells us that a lot of short positions cannot be classified,” while also pointing to a potential underdelivery. He added that “retail traders miscalculated the speed of T+1,” and many underestimated how quickly a rising stock could turn a routine short trade into an uncontrolled settlement crisis.
He warned that in an era of narrow settlement cycles and tight liquidity, “even pros can get bogged down by ego,” and that “a false short position can spiral into a spiral of penalties.” His final message had the sting of experience: “The market doesn’t punish laziness. It punishes procrastination.”
Grove’s financial health
The turmoil comes despite the company’s strong performance metrics. Billionbrains Garage Venture (Grove) is more profitable and more capital-efficient than many of its larger industry peers.
Also Read | Inside the short-selling trap of the multibagger surge near the Grove: What happened and what it means for investors?
In FY25, the brokerage posted a net profit margin of around 47%, far ahead of Angel One’s 22.4%, Motilal Oswal’s 30.1% and Nuwama’s 23.6%. Its ROE of 37.6% also leads the pack. Revenue in FY23 was Rs. 1,141 crore in FY25 to Rs. 3,902 crore, a CAGR of 85%, while PAT stood at Rs. 458 crore to Rs. 1,824 crores. EBITDA in the same period was Rs. 399 crores to Rs. 2,371 crores.
(disclaimer: Recommendations, suggestions, opinions and views given by experts are their own. (These do not represent the views of The Economic Times)
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