what is short-covering

Short Covering is best explained with an example.

Supposing a broker has 50 shares of Rs10 of some company. The broker feels that company doesnt have good prospects and sells the share at Rs. 10. Now suddenly in evening or next day, company's prospects may seem good and share price rises to Rs. 15.

At this point broker may like to buy the share and then to avoid further loss buys 50 shares at Rs15. This is known as short covering- where there is no fresh purchase.