Come 27 January, all large cap stocks to move to T+1 settlement stocks; know evolution of settlement cycle over decades

In less than a fortnight, all large cap blue chip stocks will shift to the T+1 settlement cycle. Indian markets will shift to a shorter settlement cycle from January 27 onwards, Zee Business Research Analyst Ashish Chaturvedi tell in this report.

In due course, all the stocks will eventually move to the T+1 settlement cycle.

Settlement cycle is the time between the transaction, delivery of shares and settlement of account of the two parties involved in the transaction.

Watch Now: T+1 Settlement Will Be Implemented Soon, In Which Shares T+1 Settlement Will Be Applicable?

Movement to T+1 settlement cycle was started in a phased manner in October. Currently stock markets work in a T+2 settlement cycle where shares are delivered after two days of making a trade.

India has taken a lead among its global peers in this regard as markets in US, Europe, China, Japan or anywhere function under T+2 and in some cases T+3 and T+5 settlement cycles.

India is first to have moved to the shorter cycle and the news was first brought to the viewers by Zee Business.

Also Read: Budget 2023: Experts eye big push for infrastructure sector from government

The implementation of the T+1 settlement shall allow buyers and sellers to get shares and money in their Demat accounts a day after the trade ends.

This new settlement system will apparently allow investors the option to trade more by rolling the funds and shares faster. The settlement process in India is based on the rolling settlement principle of T+2 as of now and reducing the settlement cycle to T+1 will improve market liquidity.

Indian exchanges NSE and BSE had on November 8, 2021 informed that they will implement the T+1 settlement cycle in a phased manner from February 25, 2022 beginning with 100 stocks with lowest market value.

Also Read: Budget 2023: Why agri stocks are in focus prior to Budget

He added that over 500 stocks will be added further to the list based on the same criteria of market value from the last Friday of March 2022 and every following month thereafter.

The National Stock Exchange on Friday indicated the completion of the T+1 Settlement through a circular, which stated that “there would be no further circulars from the bourse regarding the list of securities shifting to T+1 settlement.”

Once the new settlement rule gets implemented, if an investor buys shares on Monday, these will be received in their Demat account on Tuesday.

The settlement cycle has evolved over decades. In 1996, the settlement cycle was T+5 which was reduced to T+3 in 2002 and later to T+3.

At the time of physical delivery of stocks, the settlement took between 2-3 weeks.