Indian Stock Market Moves Fully to T + 1 Settlement from 27Jan2023 - vrk100 - 16Jan2023

Indian Stock Market Moves Fully to T + 1 Settlement from 27Jan2023

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In an interesting development, all stocks in Indian stock market will fully move, effective 27th of January, 2023, toward T+1 settlement cycle from the earlier T+2 settlement. The process of moving, in a phased manner, toward T+1 settlement cycle started in February 2022 as per norms laid out by India's capital market regulator Securities and Exchange Board of India (SEBI).

This is a  positive step for all financial market participants as they will be able to get access to their money within one day of trade. Similarly, you can get access to the shares you bought within one day of trade.

T+1 settlement cycle means if you buy a stock today, the particular stock would be credited to your demat account one trading day later, that is, tomorrow; while your bank account would be debited on the trading day, that is, today, for the amount traded.  T+1 simply means trading day plus one day.

 

(Don't miss to read the related blog mentioned below to know about implications of the new settlement cycle on ex-date and record date) 

 

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Related blog:

New Rules on Ex-date and Record date 06Jan2023

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Likewise, if you sell a stock today under T+1 settlement, the particular stock would be debited to your demat account today; while your bank account would be credited one day after the trading day, that is, tomorrow, for the amount traded. 

 

In the old system of T+2 settlement, it used to take two days to settle the trade. For example, if you sell a stock under T+2 settlement, it used to take two days to receive cash for the shares you sold -- under the new T+1 system, it would take just one day to receive funds for the shares sold.

The following is the timeline for the introduction of T+1 Settlement cycle:

08Nov2021:

 

In a joint press release on 08Nov2021, India's market infrastructure institutions (MIIs) laid out a roadmap for introduction of T+1 rolling settlement in equity market. MIIs are stock exchanges, clearing corporations and depositories -- like, BSE, NSE, MSE, NSE Clearing, ICCL India, CDSL and NSDL. 

As per the press release, the T+1 settlement would be introduced in a phased manner, with the first phase starting from 25Feb2022. 

In the first phase, bottom 100 stocks ranked by market capitalisation (or market cap) moved to T+1 settlement on 25Feb2022.  

 

Thereafter, from March 2022 onwards, on the last Friday of every month, the next bottom 500 stocks from the list of stocks ranked by market cap moved to T+1 settlement. 

 

A screenshot of the above press release > 

 

 

23Feb2022:

 

As per circular NSE/CMTR/51414 dated 23Feb2022, National Stock Exchange of India Ltd (NSE) released the list of securities / stocks available for trading on T+1 settlement. So did the other stock exchanges.

 

A screenshot of the circular >

 

23Nov2022:

 

In another joint press release on 23Nov2022, MIIs stated that stocks under futures and options (F&O or derivatives) segment would move to T+1 settlement in two batches -- December 2022 and January 2023. A screenshot of the press release >

 

28Nov2022:

 

As per circular NSE/CMTR/54622 dated 28Nov2022, NSE released the list of securities / stocks additionally transitioned to trading on T+1 settlement effective 30Dec2022. A screenshot of the circular >

 

 

 

26Dec2022:

 

As per circular NSE/CMTR/54992 dated 26Dec2022, NSE stated all the remaining securities / stocks as on 25Jan2023 which were in T+2 settlement cycle and all securities in F&O segment would be transitioned to T+1 settlement cycle effective from 27Jan2023. 

NSE further stated that there would be no further circulars about the list of securities for T+1 settlement in the equity segment. A screenshot of the circular >

 

 

Summing up:

 

Indian stock market moving completely toward T+1 settlement cycle effective 27Jan2023 is a pivotal moment in the history of India's capital market. To the best of my knowledge, no major stock market globally follows T+1 settlement -- as such, India is unique. 

 

Indian stock market moved to T+2 settlement from T+3 settlement in April of 2003. The transition from T+2 to T+1 signifies the rapid strides India has made in capital markets.

 

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References:

List of securities available for trading -- T+1 settlelment

SEBI amendments of Oct2022 moving all stocks from T+2 Settlement to T+1 Settlement  effective 01Jan2023

Article 16Jan2023 on Blue Chips move to T+1 Settlement from 27Jan2023

Article 14Dec2022 on T+1 Settlement cycle introduction

Article 23Nov2022 on transition of all F&O stocks to  T+1 settlement

Article 23Nov2022 on T+1 settlement for F&O stocks

SEBI (LODR) Regulations, 2015 

SEBI amendments in 2015 for record date

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Disclosure:  I've vested interested in Indian stocks and other investments. It's safe to assume I've interest in the financial instruments / products discussed, if any.

Disclaimer: The analysis and opinion provided here are only for information purposes and should not be construed as investment advice. Investors should consult their own financial advisers before making any investments. The author is a CFA Charterholder with a vested interest in financial markets. 

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