Participating in auctions can have significant effects on your portfolio and profit & loss (P&L). Here’s how:

1. Impact on Portfolio:

• Delayed Settlement:
• Shares Acquisition: If you buy shares through an auction and the transaction is not fully filled, the shares may not be credited to your demat account immediately. This delay can affect your portfolio's composition and trade timing.
• Sale Restrictions: If you participate in selling shares in an auction, the shares may be locked until the auction process is complete, preventing you from selling them in the normal market on the same day.
• Unfilled Orders:
• Partial Execution: If your order is partially filled, only a portion of the shares will be credited or debited from your account, affecting your planned portfolio adjustments.
• Automatic Cancellations:
• Order Cancellation: Unfilled orders are automatically cancelled after the auction session, meaning you might need to place new orders to achieve your investment objectives.

2. Impact on Profit & Loss (P&L):

• Price Volatility:
• Auction Price: The price determined during an auction can be significantly different from the market price, impacting your P&L. If the auction price is higher or lower than expected, it can lead to unexpected gains or losses.
• Penalty Charges:
• Seller Default: If you fail to deliver shares sold, penalties may apply, directly impacting your P&L. These penalties can include additional costs or fees imposed by the exchange.
• Delayed Realization of Gains:
• Timing of Funds: Funds from sold shares in an auction may be credited later than in normal market transactions, delaying the realisation of gains and affecting cash flow.
• Opportunity Costs:
• Locked Capital: Participation in an auction can lock your capital, preventing you from using it for other potentially profitable opportunities during the auction period.

Example Scenario:

1. Buying Shares in Auction:
• Portfolio Impact: You intend to buy 100 shares through an auction. Only 60 shares are filled and credited, delaying your planned portfolio rebalancing.
• P&L Impact: The auction price is higher than the market price, leading to higher acquisition costs and potentially lower profits if the shares do not appreciate as expected.
2. Selling Shares in Auction:
• Portfolio Impact: You sell 100 shares through an auction. The shares are locked and cannot be sold in the normal market, impacting your liquidity.
• P&L Impact: The auction price is lower than expected, resulting in lower realized gains. Additionally, unfilled shares may lead to missed opportunities for selling at a higher price in the normal market.