India officially moves to T+1 from 27th January 2023

Indian stock markets are poised to move to T+1 rolling settlement from 27th January 2023. India moved into rolling settlement in 2001 with T+3 rolling settlement. This was later compressed from T+3 to T+2 after 2 years in the year 2003. There has been no change in the last 20 years, so it was high time. SEBI started moving Indian stocks into T+1 in a progressive manner by moving the smallest companies first and the larger companies later. On 27th January 2023, the last batch of stocks comprising of all the F&O stocks will officially move to T+1; making Indian market a full-fledged T+1 system. 

 

What are the implications? Under the T+1 system, if you buy a stock today, the stock will come into your demat account by the next trading day and you can even trade the stock on T+2 day. On the other hand, if you sell the stock, the funds would be credited to your bank account next day. T+1 will also do away with BTST (buy today sell tomorrow) and STBT (sell today, buy tomorrow) as they would be redundant. This system also means that the stocks come into the demat account faster and cash comes into bank account faster. This enables quicker churn of capital and stocks improving volumes in the process. 

 

There is one more perspective here. This system puts the settlement system of cash market and the futures & options market in sync, since both would be on T+1 now. Stocks were moved to T+1 at the rate of 500 stocks per month through the year on last Friday each week. The final phase of F&O stocks will be transitioned from T+2 to T+1 on the 27th of January 2023; which will finally complete the entire transition process.

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