T+0 settlement is finally here: What does it mean for investors and traders?

Analysts and market watchers on Dalal Street believe that the introduction of T+0 settlement from March 28 would benefit traders and investors who are looking for immediate liquidity, allowing them to utilise funds and react to the market quickly in the high volatile sessions. 

In the T+0 settlement system trades in shares are settled on the same day. This means shares will quickly transferred to the buyer's account while funds are swiftly deposited in the seller's account.

Sharing his views on the T+0 settlement system, Prashanth Tapse, Senior VP (Research), Mehta Equities said that T+0 settlement could be highly beneficial to retailers who come with limited cash into market and this would revolutionise the trading landscape for the same small investor.

“Shortening of the settlement cycle means optimal utilisation of funds to make best-in-time returns to swing traders. This shift will substantially reduce the risk exposure for retail investors and the system guarantees same-day access to funds and securities, thereby mitigating counterparty and duration risks,” he said.

India has traditionally operated on a T+1 settlement cycle, where trades are finalised the day after they occur. Initially, only 25 stocks are qualified for same-day settlement. 

This includes shares such as Ambuja Cements, Ashok Leyland, Bajaj Auto, Bank of Baroda, Bharat Petroleum Corporation, Birlasoft, Cipla, Coforge, Divis Laboratories, Hindalco Industries, Indian Hotels Company, JSW Steel, LIC Housing Finance, LTIMindtree, MRF, Nestle India, NMDC, Oil And Natural Gas Corporation, Petronet LNG, Samvardhana Motherson International, State Bank Of India, Tata Communications, Trent, Union Bank of India and Vedanta.

Sunil Nyati, Managing Director, Swastika Investmart added that with real-time settlement, Indian exchanges show they are serious about keeping up with innovation and making the market more competitive. This change sets the groundwork for a livelier and stronger market environment.

“As investors adjust to T+0 settlement, they need to stay alert. They should use technology, smart risk management, and market knowledge to grab opportunities and tackle the new challenges this shift brings,” Nyati said.

Suman Bannerjee, CIO, Hedonova added that Sebi’s T+0 settlement mitigates counterparty risk and enhances overall market efficiency by optimising the trade settlement procedure. As a result, T+0 settlement holds the promise of bolstering investor confidence, augmenting market liquidity and fostering smoother trading operations.

According to 5Paisa, under T+1 sellers receive 80% of their cash on the day of sale with the remaining 20% delayed until the next day. With the T+0 system sellers would have immediate access to 100% of their cash on the transaction day.