Stock market: What changes for investors tomorrow?

Market


Shares of India’s biggest listed companies are set to move to a faster settlement cycle, to switch to the so-called T+1 system. From tomorrow, stocks from Reliance Industries Ltd (RIL) to Tata Consultancy Services Ltd (TCS) and Adani Enterprises Ltd, which together comprising 80% of India’s equity market, will be settled on a ‘trade-plus-one-day’ timeline versus the earlier two-day process. India is among the firsts in the world to go for such a faster trading settlement cycle.

“With the shorter trade settlement cycle in the Indian equity market set to be implemented, we will be the the first country in the world to have a T+1 settlement cycle. It augurs well for the Indian equity markets from a liquidity perspective and it shows how well we have grown on the digital journey to ensure seamless settlements within 24 hours. This will also help the investor in reducing the overall capital requirements with the margins getting released on T+1 day and getting the funds in the bank account within 24 hours of sale of shares. The shift will boost the operational efficiency as the rolling of funds and stocks will be faster,” said Ajay Menon, MD & CEO of Broking & Distribution, Motilal Oswal Financial Services.

Indian capital markets 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 of the securities available in the equity segment. The transition to T+1 has been happening in batches based on market cap (small to big) since February 2022.

“This is a truly remarkable achievement as India will be the first market to achieve a complete T +1 trading settlement. A republic day gift to the nation. Even USA has not been able to achieve this yet. This should have a positive impact on trading volumes as the rolling of funds will be faster now. The faster settlement ensures faster liquidity for investors which should give equities investments an extra edge over other asset classes,” said Divam Sharma, Founder at Green Portfolio, SEBI Registered Portfolio Management Service Provider.


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