T+1 Settlement in India: What Investors Need to Know

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We are excited to announce that the Indian stock market is set to implement a new trade settlement cycle, known as T+1, starting January 27th, 2023. This new system will shorten the time it takes for securities bought or sold to reflect in an investor's demat account Under the T+2 settlement cycle, which is currently in place, securities bought or sold would reflect in an investor's Demat account after a period of two days. However, with the new T+1 settlement cycle, securities bought or sold from Friday onwards will reflect in an investor's Demat account after a period of just one day. What is a T+1 Settlement? The rule of T+1 settlement is aimed at increasing the speed of settlement and providing faster liquidity for investors. This will allow investors to make more informed decisions and potentially see a boost in their returns. The T+1 settlement cycle will include all Nifty 50 and BSE Sensex stocks. Faster settlement means that investors will have their money transferred within one day of profit booking, rather than the two days it currently takes under the T+2 settlement cycle. This will enable investors to re-invest in the direct equity market much faster. Increased liquidity will also provide investors with more flexibility. With faster settlement, investors will have access to their funds sooner, which will allow them to make more investments, or even make more trades in a single day. This increased flexibility can be especially beneficial for investors who have a high-risk appetite and are looking to make quick returns on their investments. Another benefit of the T+1 settlement cycle is that it may lead to an increase in intraday or "buy today and sell today" (BTST) stocks' trade volume. This is because investors will have the ability to re-invest in the direct equity market much faster, as money will be transferred within one day of profit booking, compared to the two days it currently takes under the T+2 settlement cycle. Additionally, the T+1 settlement may also lead to more people with a low-risk appetite moving to the cash segment instead of the future and option trade. This is because, in the cash segment, traders won't have to square off one's position in loss and rollover in upcoming series paying unnecessary brokerage and taxes. This could make the cash segment more attractive to investors who have a low-risk appetite and are looking for a safer way to invest in the stock market. It's worth noting that the impact of the T+1 settlement cycle on other asset-class investments is yet to be seen. However, it's expected that the ETF settlement cycle and equity mutual funds cycle will also be affected. This could lead to changes in the way these asset classes are traded and may provide investors with more options for diversifying their portfolios. In conclusion, the T+1 settlement cycle in India is a positive step forward for stock market investors. To know more about the T+1 settlement and its updates, watch our blog space for more information. Watch Youtube video: SEBI New Rule: The World Leader in Settlement Cycle T+1 From Jan 27th