Short Covering is the process of buying back shares or assets that were previously sold short to close an existing short position.
In short selling, traders sell shares they don’t own expecting the price to fall. When prices start rising instead, they buy back the shares to limit losses or book profit—this is called short covering.
Short covering can lead to a sharp price increase, especially if many traders rush to close their positions simultaneously.
Trading activities like this occur on exchanges such as the National Stock Exchange and Bombay Stock Exchange under regulation of the Securities and Exchange Board of India.
"A trader sells a stock at ₹100 expecting it to fall. Instead, it rises to ₹120, so they buy it back—this is short covering."