Markets to shift to T+1 settlement from January 27; here’s all you need to know

Domestic equity market is set to enter into a shorter trading cycle of T+1 settlement (from T+2) from January 27. To put it in simple words, a shift from T+2 to T+1 settlement will mean that any stock purchased, say for example on Monday, would be credited to the investor’s account on Tuesday (a day earlier instead of Wednesday). As of now, all stocks that have their derivatives will be shifted to T+1 settlement. This represents over 75 per cent of the listed market cap of the NSE.

Earlier, till 2001, the domestic stock market had a weekly settlement system. In 2001, the market regulator Sebi moved the stock markets to a rolling settlement system of T+3. This was later shifted to T+2 in 2003. According to 5paisa.com, the last batch comprising of F&O stocks would be officially moved to T+1 on January 27, making the entire Indian market a T+1 market.

Looking at the benefits, it would benefit both the exchanges and the traders or investors. Market watchers believe that these changes will bolster overall liquidity due to faster rollover and are a big positive for all stakeholders including issuers, investors, and intermediaries.

Milan Vaishnav, Founder, Gemstone Equity Research and Advisory said, “It is overall expected to increase the exchanges’ turnover in the long run. For investors and traders, it would mean faster rollover/turnover of money and profits. They would get their payouts a day earlier than usual and it would also mean lesser interest cost on the borrowed funds.”

Atanuu Agarrwal, Co-Founder, Upside AI said, “Most markets around the world function on a T+2 basis. T+1 settlement puts India ahead of even the US, which is the preeminent destination when comes to capital markets. This is a fantastic milestone and another feather in the cap for India’s financial ecosystem.”

Dhiraj Relli, MD & CEO, HDFC Securities said that shorter trading cycle will make the market more efficient. “Other than China, we will be the second largest country to move T+1 settlement. Trust, efficiency and ease of doing business are the enablers that have added confidence in the participation of investors,” Relli said at BT Market Today Summit on January 24.