Stock exchanges are implementing T+1 settlement rule from today, 25 February i.e. Friday. This is a system of settlement of shares. Right now this rule is applicable for select shares.
T+1 Settlement System: Stock exchanges will implement T+1 settlement rule from today, 25 February i.e. Friday. This is the system of settlement of shares (T+1 Settlement System). Right now this rule is applicable for selected shares, gradually the rest of the shares will also be added to it. Till now T + 2 settlement system was applicable in the country. At present, this system will be applicable on both NSE and BSE stock exchanges. After all, what is T+1 settlement system and what will be the impact on different investors and their investments. How will you benefit from it?
Settlement will happen in 24 hours
When investors or traders buy or sell shares, it takes some time for the shares to arrive in the demat account or money in the savings account. Currently, T+2 settlement system is applicable in India, that is, the settlement of shares is completed within 2 days of the order of buy or sell. The shares will be credited to your demat account within 24 hours after the T+1 settlement system is implemented. However, the stock exchange was given the option to either adopt the new system or continue with the existing system.
Corporates, FIIs, DIIs will benefit
Swastika Investmart Ltd. Amit Pamnani, Chief Investment Officer and DGM of SEBI says that this move of SEBI will be very beneficial for those who invest more in the market like Corporates, FIIs, DIIs. A day before settlement can give them more liquidity and reduce margin requirements. Whereas for small or retail investors, this T+1 Day settlement system will not make much impact. However, it should be noted that retained investors contribute 45 per cent of the daily trading volume on the exchange. The Baker 55 per cent comprises of Corporates, FIIs, DIIs and others.
Pros and cons for common investors
Pamnani says this will provide investors with post-trade execution of their funds and earlier receipts before settlement. In addition, multiple operations and market risk can be reduced. However, it cannot be harmful to any class of investors except to comply with the same day settlement process. With the introduction of T+1 settlement system, the risk of pay-in/pay-out default will be reduced. There will be an increase in the trading volume as the margin on your trading account will be blocked for only one day.
T+1 Settlement System: Which Shares Will Come?
Initially, shares of only 100 companies will come under the T + 1 settlement system. These companies will be selected on the basis of market valuation. Initially, 100 companies with the lowest valuation will be made part of it. Then, on the Friday of every next month, the shares of 500 companies will be brought in this list. This will continue till all the shares are covered under the new arrangement.
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