In order to switch to the so-called T+1 system, shares of India’s largest listed companies are set to move into a faster settlement cycle. Starting tomorrow, stocks ranging from Reliance Industries Ltd (RIL) to Tata Consultancy Services Ltd (TCS) and Adani Enterprises Ltd, which together comprise 80% of India’s equity market, were traded on a ‘trade-plus-one-day’ timeline vs. will be dealt with. Earlier two day process. India is one of the first countries in the world to have such a fast trade settlement cycle.
“With shorter trade settlement cycle Indian equity market Ready to come into force, we will be the first country in the world to have a T+1 settlement cycle. This augurs well for Indian equity markets from a liquidity point of view and shows how well we have progressed in the digital journey to ensure seamless settlements within 24 hours. This will also help in reducing the overall capital requirements to the investor with margin being released on T+1 day and funds being received in the bank account within 24 hours of the sale of shares. Ajay Menon, MD & CEO, Broking & Distribution, Motilal Oswal Financial Services, said the change will boost operational efficiency as the rolling out of funds and stocks will be faster.
Indian capital market regulator Securities and Exchange Board of India (SEBI) on September 07, 2021 permitted stock exchanges to introduce T+1 settlement cycle from January 01, 2022 on any securities available in equity segment. From February 2022, the transition to T+1 is taking place in batches based on market cap (smallest to largest).
“This is indeed a remarkable achievement as India will be the first market to achieve a full T+1 trading agreement. Gift to the country on Republic Day. Even the USA is yet to achieve this. On trading volumes This should have a positive impact as now the movement of funds will be faster. Faster settlement ensures faster liquidity for investors, thereby making equity investments more competitive than others, said Divam Sharma, founder, Green Portfolio, a SEBI registered portfolio management service provider. There should be additional leverage across asset classes.
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