How stock market investors may benefit from T+1 settlement in India — explained


T+1 settlement: Indian stock market is going to implement shorter trade settlement cycle from 27th January 2023. With this implementations, securities bought or sold from Friday onwards will reflect in one’s demat account after a period of one day. The implementation will take place after inclusion of last 256 stocks in T+1 settlement cycle, which includes all Nifty 50 and Sensex stocks like Reliance Industries Ltd or RIL, Tata Motors, Stata Bank of India (SBI), Infosys, etc.

Highlighting the direct impact of T+1 settlement cycle on stock market investors, Divam Sharma, Founder at Green Portfolio — a SEBI registered PMS provider said, “After implementation of T+1 settlement cycle, one should have a positive impact on trading volumes as rolling of funds will be faster now. Faster settlement ensures a faster liquidity for investors, which should give equities investments an extra edge over other asset classes.”

BTST push to cash segment

On how T+1 settlement in India can benefit equity investors, Ravi Singhal, CEO at GCL Broking said, “After implementation of T+1 day settlement, capacity to re-invest in direct equity market is expected to rise as one would have money transferred within one day of profit booking. Earlier, it was after two days of profit booking due to T+2 settlement cycle. T+1 settlement may lead to rise in intraday or BTST (Buy today and sell today) stocks’ trade volume as some people with low risk appetite may move to cash segment instead of future & option trade. So, those who have low risk appetite may also indulge in BTST trade via cash segment.”

On how BTST trade in cash would be more safer in comparison to F&O segment, Kartik Jhaveri, Director — Wealth at Transcend Capital said, “In F&O segment, BTST calls are highly risky and one has to square off one’s position after a particular period of holding whereas in cash segment, one can hold the position for as long as one can or say till their stop loss doesn’t trigger. In cash segment, traders won’t have to square off one’s position in loss and roll over in upcoming series paying unnecessary brokerage and taxes.”

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Asked about this T+1 settlement cycle’s impact on other asset class investments, Pankaj Mathpal, MD & CEO at Optima Money Managers said, “When there was T+2 settlement in Indian stock market, equity mutual funds had T+3 settlement cycle whereas ETFs had T+2 settlement cycle. After implementation of T+1 settlement in Indian stock market, an announcement in regard to ETF settlement cycle and equity mutual funds cycle can be expected soon.”

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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