Indian Bourses Adopt T+1 Settlement from Feb 2022: Detailed Guide| Espresso


Indian bourses to introduce T+1 settlement from Feb 2022: What it means | My Espresso

November 16, 2021
Indian bourses to introduce T 1 settlement from Feb 2022: What it means | My Espresso

Indian bourses to introduce T+1 settlement from February 2022: What it means

The Indian equity market is preparing to move to the trading plus one day (T+1) settlement cycle, which would make it the world’s fastest stock market.

From February 25, 2022, delivery transactions of the equity market will be settled in less than 24 hours. Meaning the buyer will get the shares to their account and the seller will receive the payment in less than 24 hours. In the present T+2 system, which is followed by most markets around the world, transactions are settled in less than 48 hours. Moving to a shorter settlement cycle aims to improve liquidity and mitigate the risk of defaults.

Exchanges have said they will roll out the feature for the bottom 100 stocks, and the next batch of bottom 500 and move up. The bourses expect to start the T+1 cycle for Nifty stocks in 2023.The Securities Exchange Board of India (SEBI) had through a circular on September 7, 2021, directed exchanges to implement the T+1 settlement cycle from the January 1, 2022. However, concerns were voiced by several foreign portfolio investors (FPIs), which work in various time zones globally. Brokers and custodians said the rollout of the T+1 system will need adequate preparations to ensure FPI transactions go through seamlessly, right from conversation of foreign currency to local currency to purchase and sale of stock to repatriation of funds.

This also meant that the broker's back office has to be functional well beyond its working hours.  The foreign investors would also find it difficult to hedge their net India exposure in dollar terms at the end of the day under the T+1 system. The banking hours do not match the overseas banking hours.As a result, brokers requested SEBI to postpone the timeline of rollout, after which the deadline was moved to February 25 next year.

Below is the list of stocks which is going into T+1 settlement cycle.

SUNRINVSunrise Industrial Traders Ltd
PEOPLINPeoples Investments Ltd.
ZSWASTSASwastik Safe Deposit & Invest.
UNIJOLLUnijolly Investments Co. Ltd.
HEALINVHealthy Investments Ltd.
ZSATYASLSatyam Silk Mills Ltd.
OXEM BAPOxemberg Apparels Ltd.
GDTRAGNG.D. Trading & Agencies Ltd.
ZSIYARPOSiyaram Poddar Finance & Tradi
RIDHISYNRidhi Synthetics Ltd.
ZARDIINVArdi Investment & Trading Ltd.
ZBALGHOLBalgopal Holding & Traders Ltd
WMINIMTWestern Ministil Ltd.
INRADIAIndia Radiators Ltd.
MIRCHMirch Technologies (India) Ltd
ZHEMHOLDHEM Holdings and Trading Ltd.
SHYAMHOShyamal Holdings & Trading Ltd
TERRAFORMTerraform Magnum Limited
VIKSHENViksit Engineering Ltd
PBGLOBALPB Global Limited
IGLFXPL-BIndo Gulf Industries  Ltd.
CORAGROCoromandel Agro Products & Oil
SAGRSOY-BSagar Soya Products Ltd.
SHIKHARLETRShikhar Leasing and Trading Lt
TRANOCETransoceanic Properties Ltd.
ZLEENCONLeena Consultancy Ltd.
ZGOVPOOXGovind Poy Oxygen Ltd.
ZHINDHSGHindustan Housing Co. Ltd.
VISHINVVishvakirti Investment Limited
ZARCOLEAArco Leasing Ltd.
KUSUMELKusam Electrical Industies Ltd
ZNILKENGNilkanth Engineering Ltd.
SOBMESobhagya Merchantile Ltd.
MRUTRMrugesh Trading Ltd.
ANSHNCOAnshuni Commercials Ltd.
ROSEMERRose Merc.Limited
ZSANCHTRSanchana Trading & Finance Ltd
ZWINMOTRWinmore Silk Mills Ltd.
BAJGLOBBajaj Global Ltd
MAGANTRMagnanimous Trade & Finance Lt
MERCTRDMercury Trade Links Ltd.
MEENSTMeenakshi Steel Industries Ltd
VARUNMEVarun Mercantile Ltd.
VINVANIVinayak Vanijya Ltd.
ZJEETMACJeet Machine Tools Ltd.
SRYSTLTSriyansh Steel Ltd
PARINFRAParab Infra Limited
CITIZYNCitizen Yarns Ltd.
PERVASIVEPervasive Commodities Limited
PURITYPurity Flex Pack Ltd
VARDHCHVardhaman Laboratories Ltd.
PROCALProcal Electronics India Ltd
CROMAKMCromakem Limited
DATASOFTDatasoft Application Software
TIRTPLSTirth Plastic Ltd.
SFLINTERSFL International Limited
LADIAMOLaser Diamonds Ltd.
SOFTRAKVSoftrak Venture Investments Lt
INFRAQUESTInfraquest International Limit
GTEITG-Tech Info-Training Ltd.
MPFSLMather & Platt Fire Systems Lt
CHEMIESYNTChemiesynth (Vapi) Limited
ALSTONEAlstone Textiles (India) Limit
TFLLTirupati Fin-Lease Ltd.
ABHIJITAbhijit Trading Co. Ltd.
SHIVKAMALShivkamal Impex Limited
RGCELReal Growth Commercial Enterpr
RAIDEEPINDRaideep Industries Limited
SUERYAAKNISueryaa Knitwear Limited
SPACAPSSPA Capital Services Limited
JYOTINJyot International Marketing L
VARDHANCFLVardhan Capital & Finance Limi

In the new system, the exchanges will jointly introduce the T+1 cycle based on market capitalisation. The present form of implementation in phases will begin on February 25, 2022, wherein the 100 stocks with the lowest market capitalisation will fall under T+1 settlement. Subsequently, from March 2022 on the last Friday (in case of a holiday on the next trading day) of every month, the next 500 scrips with the lowest market capitalisation will fall under the T+1 cycle.

In the original announcement, the regulator had directed stock exchanges to decide whether they want to opt for the shorter cycle for any of the listed scrips. Also, once an option was exercised, it was not be changed for the next six months. A notice of one month had to be given before moving to the T+2 cycle. But allowing exchanges to introduce T+1 optionally on stocks would have resulted in problems as various exchanges would have taken different decisions.

With this phased manner of implementation based on market capitalisation, FPIs can breathe easy as the FPIs trades based on companies falling at the top end of the market capitalisation. This gives them enough time to test, codify and implement the system. The FPIs need not worry until October-November 2023. For domestic participants, T+1 will improve market liquidity and mitigate default risk and enhance trading volumes of the exchanges.

Chandresh Khona
by Chandresh Khona

Product Offerings Head

A teacher, writer, travel buff and now Espresso's Product Offerings Head. Ten years here has allowed me to lead the digital team at Sharekhan. My true passion lies in stock market charts.