Indian Market Shifting to T+1 Settlement Cycle

The Liquidity in the market is about to increase as from January 27 the market settlement cycle is getting shortened to T+1. By this buyers and sellers can trade faster i.e. they can use corporate actions like dividends and bonus shares in their accounts one day after the market closes. Earlier the settlement cycle is said to be completed only when the buyer receives the shares and the seller receives the money. But now the trade can be done after one day.

Previously, in 2003, SEBI (Securities Exchange Board of India) reduced the settlement period from T+3 days to T+2 days. And hence the decision to switch to T+1 settlement has been made 20 years after. When the Indian market switched the settlement phase from T+3 to the T+2 settlement cycle on April 1, 2003.

Initial Introduction to T+1 Settlement Cycle

Market Shifting to T+1 Settlement Cycle

Initially, on September 7, 2021, the Securities and Exchange Board of India (SEBI) gave the green flag for the T+1 settlement on January 1, 2022. And Later on November 8, 2021, the stock exchanges shared the information that it will implement the T+1 settlement cycle in a planned manner. Starting from the bottom 100 stocks in terms of market value, on February 25, 2022. Thereafter, 500 more stocks were added based on the same criteria of market value after the last Friday of March 2022 and every following month thereafter.

Stocks under T+1 Settlement Cycle Criteria

After the latest announcement, the T+1 system will include all the large-cap and blue-chip stocks. This information was even confirmed after the circular released by the NSE came to light. It said that it is the last circular from the organization regarding the list of securities shifting to the T+1 settlement.

This step makes India the first country to make such quick stocks and investment transactions ahead of the US. But after this, the new challenge comes where the exchanges have to deal directly with a broker dependency. But we have to agree that the Technology has been used at its best by SEBI.

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