The Indian stock markets have switched to a T+1 (trade plus one day) settlement cycle for their final list of large stocks, starting 27th January 2023 a move that will reduce margin requirements for clients and boost retail investment.
This means that market trade-related settlements will need to be cleared within one day of the actual transactions, as opposed to two working days under the previous T+2 system.
The move to T+1 was announced by the stock exchanges NSE and BSE in November 2021 and is being implemented in a phased manner. This change is expected to increase liquidity in the market and boost the overall financial ecosystem in India.
Some Relevant FAQs
Question: What is the T+1 settlement cycle?
Answer: T+1 (trade plus one) means that market trade-related settlements will need to be cleared within one day of the actual transactions.
Question: How does T+1 differ from the previous settlement cycle in India?
Answer: Previously, trades on the Indian stock exchanges were settled in two working days after the transaction was done (T+2). The switch to T+1 will require settlements to be cleared within one day of the transaction.
Question: How will T+1 affect clients and retail investment in India?
Answer: The T+1 system is expected to reduce client margin requirements and boost retail investment.
Question: How is T+1 being implemented in India?
Answer: The T+1 system is being implemented in a phased manner, starting with the bottom 100 stocks in terms of market value on February 25, 2022, and adding 500 more stocks based on market value criteria every following month. As of January 27, 2023, all trades in the equity cash segment will be conducted on a T+1 basis.
Question: Why is T+1 seen as a positive change for the Indian financial ecosystem?
Answer: The T+1 system is expected to increase market liquidity, as the money cycle will move faster without waiting for an extra day. It is also seen as a positive step for issuers, investors, and intermediaries.