T+1 settlement cycle for large-cap, blue-chip stocks comes into effect from today

In India, the settlement process is based on the rolling settlement principle of T+2 as of now.

The Indian equity market will completely shift to a shorter trading cycle called T+1 settlement on January 27. This will allow buyers and sellers to get shares and money in their accounts one day after the trade ends.

The T+1 settlement system will give investors the option to trade more by rolling the funds and shares faster. The settlement cycle is said to be completed only when the buyer receives the shares and the seller receives the money.

In India, the settlement process is based on the rolling settlement principle of T+2 as of now. Reducing the settlement cycle further to T+1 will enhance market liquidity.

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The stock exchanges informed on November 8 that it will implement T+1 settlement cycle in a phased manner, starting with the bottom 100 stocks in terms of market value, from February 25, 2022. Thereafter, 500 more stocks will be added based on the same criteria of market value from the last Friday of March 2022 and every following month thereafter.

Those transacting in stocks falling under T+1 settlement cycle will get their money or shares delivered in less than 24 hours, Indicating the completion of the move a circular from the NSE said that there would be no further circulars from the bourse regarding the list of securities shifting to T+1 settlement.

After the new rule, if an investor buys 50 shares on Monday, these will be received in their Demat account on Tuesday.

“This will make India the first country in the world to go for such a quick settlement putting us ahead of the US. The T+1 settlement was proposed recently with implementation timelines of 24 months by the Securities Exchange Commission (SEC),” Manoj Dalmia Founder and Director, Proficient Equities Limited, told Moneycontrol.

Reaching to this announcement, author and chief advisor to the Chief Minister of Odisha state government, R. Balakrishnan tweeted, "Kudos to @SEBI_India. T+1 from 27 January. The next step is to let us deal directly on screen without a broker. Technology has been used well by Sebi."

"All settlements of equities will be T+1 after Republic day. Our digital ecosystem is best in the globe," tweeted Gurmeet Chadha, Chief Investment Officer at Complete Circle.

Sebi research analyst and founder of WeekendInvesting.com Alok Jain took on to the Twitter saying, "India is a leader in many Firsts.... after UPI, here comes T+1 settlements!!"

The move to shift to T+1 settlement comes two decades after the Indian market decided to shift T+2 settlement cycle from T+3 on April 1, 2003. Most markets around the world follow the T+2 system. However, digital reliance for trading is pushing bourses to shorten the settlement cycles.