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Indian Equity Market Prepares to Finalise T+1 Settlement

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On January 27th, India’s move to T+1 settlement will be complete, when all large cap and blue chip stocks listed on Indian stock exchanges will move from T+2 to T+1 settlement, allowing buyers to receive shares and sellers to receive funds just one day after trading rather than the current two-day cycle.

The move to T+1 settlement in India has followed a phased approach over the last year, starting with the lowest value stocks in February 2022. Every month since then, another 500 stocks have been added to the T+1 settlement cycle. The transition will conclude when all large cap and blue chip stocks move over on January 27th.

As well as increasing efficiency, the faster settlement cycle is expected to enhance market liquidity, as market participants will be able to trade more as a result of funds and shares moving more quickly.

“India’s full transition to T+1 settlement is the first step in homogenising settlement cycles around the world,” says Philip Slavin, CEO of Taskize, the inter-company workflow solutions company owned by Euroclear. “However, unlike the global nature of the US markets, most of the trading in India is domestic. In contrast, US securities globally trade and settle across US, Europe and Asia. As a result, increased complexity due to time zone differences must be considered.”

Other stock markets around the world – particularly the US, where most stocks are settled on a T+2 basis – will no doubt be watching India with interest.

“The common tactical approach of ‘throwing more bodies’ at the problem is no longer viable when physical distance makes the logical clock tick faster,” says Slavin. “This must be the year everyone has to prepare for the US move to T+1 so solutions that are available today that can be deployed quickly with minimal risk can help release the time pressure on settlement processing.”

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