A move to a shorter settlement cycle could give investors the option to trade more by rolling the funds and shares faster, market players said. Currently, the market follows a T+2 settlement system. Under this, buyers and sellers get the stocks and funds in their demat and bank accounts on the third working day, including the day of trade.
On November 8, 2021, all the stock exchanges, depositories and clearing corporations had jointly announced the move to the shorter T+1 settlement cycle in a phased manner. To start with, on February 25, 2022, stocks with lowest market capitalisation were the first to be moved to the T+1 system.
Since then, on every last Friday of the month, the next batch of 500 stocks with the lowest market cap were shifted to the T+1 system.
On January 27, all the large-cap and blue-chip stocks will move to the T+1 system. Indicating the completion of the move, on Friday, a circular from the NSE said that there would be no further circulars from the bourse regarding the list of securities shifting to T+1 settlement.
On September 7, 2021, despite strong resistance from some sections of market players, Sebi had decided to move to the T+1 cycle. However, it had allowed exchanges to decide how, when and in which stocks they wanted a shorter settlement cycle. Market players said a shorter settlement cycle will be advantageous to the new age, tech-driven brokers.
In the derivatives segment, all the stocks will in one shot move to this shorter cycle on January 27. In the statement of November 2021, some brokers claimed India is the first major stock market that is moving to a T+1 trading cycle.
The move to a T+1 settlement would be complete nearly 20 years after the Indian market had moved to the T+2 settlement cycle from T+3 on April 1, 2003. Currently, most markets around the world follow the T+2 system. But technological advancements are pushing bourses to shorten settlement cycles.
Demat a/cs rise 34% YoY to 11cr in Dec
Total number of demat accounts rose to 10.8 crore in December 2022 — a surge of 34% on a yearly basis — on attractive returns from equity markets, ease of account opening process and increased financial savings. The incremental additions were 21 lakh last month, compared to 18 lakh each in October and November, and 20 lakh in September, according to Motilal Oswal Financial Services. But the incremental account additions was below the FY22 average run-rate of 29 lakh.