Wondering what is Settlement Holiday? Settlement holidays are those days when the market is open. However, the depositories, such as CDSL (Central Depository Securities Limited) and NDSL (National Securities Depository Limited) are closed.
Published on 03 March 2023
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This restricts the investors from taking delivery of stocks into their Demat account, and days such as these are known as Settlement Holidays.
Note:Saturdays and Sundays are, by default, always Settlement Holidays.
Settlement Holidays cause a day delay for the shares to be deposited in the Demat account. In other words, an extra working day is added to settling the Demat account. These Settlement Holidays are either because depositories are closed or due to bank holidays.
Settlement Holiday Meaning
Let's take an example for better understanding and clarity to understand Settlement Holidays better. Suppose you are an investor who buys 10 shares of a company on a Thursday. Friday is Holi, and Saturday and Sunday are holidays. When you purchase/buy shares, you buy them from someone willing to sell them. Therefore, these shares will be transferred from the company's dematerialized or Demat account to the investors', i.e., you in this case. The entire process of transferring shares will take close to 2 working days.
The first day after you buy the shares will be represented as T+1, trading day +1.
The second day will be T+2, where shares will be deposited into your account, enabling you to sell your shares post this day.
However, there is a settlement holiday in-between; thus, it takes an extra working day for the shares to get deposited into your account. Hence, the shares that were supposed to be deposited into your account on Monday will be deposited on Tuesday. Therefore, leading to a one-day delay.
Moreover, a Settlement Holiday is when the stock markets are closed, but trading can be done via an online platform. They are also referred to as transfer holidays because investors can move shares from one broker to another if they have invested in stocks or mutual funds. In India, settlement holidays include public holidays and all bank holidays.
We can say that a settlement holiday is that day when although the stock market is closed for trading, settlements of trades occur as usual or as done on the previous day. No settlement takes place on such days. The SEBI (State and Exchange Board of India) dictates and mandates the settlement to take place on the next working day rather than on weekends or public holidays.
Difference Between Trading Holiday and Settlement Holiday
A trading holiday is when the stock exchange is closed for trading and no transactions can be carried out. A trading holiday takes place when the exchange operates the stock market as usual without any settlement.
Contradictorily, a settlement holiday is when stock markets are closed, but trades can be made through online platforms. They are also referred to as "transfer holidays”. Whenever there is a partial holiday, the settlement would be done before declaring a partial holiday, which is not subject to any intervention.
Settlement of trade in India happens on a T+2 basis. This means that the actual settlement takes place two days later. Traders using T+2 give them time for corrections before money actually locks in.
This is not the same in other markets in the world, where settlement takes place on an immediate basis. So as soon as the settlement takes place, the trade is made. This difference is attributed to the banking system in India. Moreover, there is at least a day's delay before the money reaches the bank account. This is known as T+1 or same-day settlement.
List of Settlement Holidays 2023
Here's a list of all Settlement Holidays 2023 for trading
Republic Day- Thursday
Holi- Tuesday
Ram Navami- Thursday
Mahavir Jayanti-Tuesday
Good Friday- Friday
Ambedkar Jayanti- Friday
Maharashtra day- Monday
Bakr id- Wednesday
Independence day- Tuesday
Ganesh Chaturthi- Tuesday
Gandhi Jayanti- Tuesday
Dussehra- Tuesday
Diwali- Tuesday
Gurunanak Jayanti- Monday
Christmas- Monday
April 1- Annual Bank Closing Every Year
Apart from these, as we mentioned earlier, Saturdays and Sundays are always Settlement Holidays by default.
Conclusion
Therefore, it must be clear that Settlement Holidays are a total of the National Stock Exchange (NSE), Bombay Stock Exchange (BSE), and all the other share market holidays. While trading, investors should always keep a settlement holiday list in mind so that there won't be any confusion regarding calculations of settlement days.
This will help them bring clarity and transparency to their respective trading transactions in their Demat accounts. Even the Settlement Holidays 2023 mentioned above will prove to be extremely helpful and beneficial, as designated holidays will help conduct business efficiently and regularly without any delays and, therefore, must be specified.
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The core maxim of investment is to set realistic expectations regarding returns, so you can plan your goals and achieve them. A simpler way to understand the importance of assuming practical returns on investment is through an example.
Difference Between Large Cap and Medium Cap in Stock Market
Choosing the right stocks for trading and investment purposes can be a little difficult and tricky, especially when you are only starting your journey in the stock market. But is it all that difficult? Not if you know what parameters you need to select your stocks.
Employees play an important role in the growth and development of a company. They are a driving force that keeps the company going. The efforts and diligence of employees is the key component for the expansion and success of a business.
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