Reliance, TCS, Adani stocks move to T+1 settlement soon

India is set to become only the second South Asian nation after China to transition to the Trade Plus One Day (T+1) settlement cycle. Ironically, even the US is still mulling about shifting to T+1 system. As a result, the shares of nearly 200 big Indian companies will be moved to the T+1 settlement cycle from the earlier T+2 cycle. The move has been happening in a phased manner since the last one year and the final list of index and F&O stocks will transition on 27th January 2003. Effective, 27th January, all these companies will start dealing on T+1 basis. 

 

Prior to 2001, all trade settlements on the NSE and BSE used to happen between Monday and Thursday, with final settlements on Friday (T+5). SEBI came down heavily on the system after the Ketan Parekh scam of 2001 and replaced the weekly settlement with T+3 rolling settlement cycle in 2001. Later, in 2003, India shifted to T+2 and has stayed there for 20 years. Now the move is to an impressive T+1 system. This will ensure that stocks come into demat day after purchase and cash comes into the bank account a day after sale of shares.

 

However, rapid strides in internet trading and online banking have made T+1 settlement workable. Remember, India is already on T+1 for futures and options and only cash markets are on T+2 right now. Eventually, it may be T+0, but have to wait for that to happen. Meanwhile, foreign portfolio investors (FPIs) have expressed time-zone concerns as they operate in different geographies. However, many FPIs also favour this system, which is safer, more secure and also more transparent. Quicker churn of investor money will mean operational efficiencies and fall in trading costs.

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