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Top 50 Indian stocks to switch to new settlement cycle only in 2023: Report

The nation looks to push ahead with the trade plus one day or T+1 system, which most global markets are yet to implement, from February next year

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Stock Market | BSE Sensex | Foreign Portfolio Investors

Dhwani Pandya & Ashutosh Joshi | Bloomberg 

Stock market, BSE, sensex
Photo: Bloomberg

India’s top 50 stocks are likely to move to a new shorter settlement cycle only after more than a year, giving ample time to foreign and domestic broking houses to adjust, according to Edelweiss Alternative Research.

The nation looks to push ahead with the trade plus one day or T+1 system, which most global are yet to implement, from February next year. The move has received support from foreign after initial resistance as it allows them enough room to handle issues such as different time zones and forex-related deadlines.

All the Nifty 50 constituents will switch to the T+1 cycle in the last batch starting January 2023, Edelweiss said in a note on Tuesday. “We expect no near term impact” as the implementation of the new mechanism will be a gradual process, mainly from lower to higher market capitalization companies, it said.

India’s market infrastructure institutions jointly announced a plan on Monday to introduce the new cycle in a phased manner from February. The exchanges will rank listed stocks in a descending order based on their average market capitalization in October and only bottom 100 equities shall be available for the T+1 settlement from Feb. 25. From March, the next bottom 500 stocks from the list will be available for the shorter trade cycle, it said.

Asia Securities Industry and Financial Association, a foreign investors’ lobby group, said the phased implementation of the proposal would not cause based in Europe and the U.S. face pre-funding requirements for their trades in India.

Possible concerns about the market getting fragmented because of the proposed move have been avoided, it said in a statement. The plan to shift scripts on the basis of market capitalization would mean most will not be impacted till October or November next year, the group said.

In September, the Securities and Exchange Board of India announced the plan to allow exchanges to offer next-day trade settlement in some stocks, instead of the two-day or T+2 mechanism practiced in most markets, including the U.S. However, some foreign investors sought to delay its implementation from early next year, saying they needed additional time to prepare systems and processes for the change.

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First Published: Tue, November 09 2021. 18:11 IST
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