India bluechips to shift to world’s fastest settlement cycle T+1 this week

Shares of about 200 of India’s biggest listed companies are set to move to a faster settlement cycle, making the South Asian nation the second market after China to switch to the so-called T+1 system.

Starting Jan. 27, stocks from Reliance Industries Ltd. to Tata Consultancy Services Ltd. and Adani Enterprises Ltd. — together comprising 80% of the country’s equity market — will be settled on a ‘trade-plus-one-day’ timeline versus the earlier two-day process. The yearlong changeover gave market intermediaries time to prepare, said Prashant Vagal, executive vice president at National Securities Depository Ltd.

This last step in the transition will be closely watched by foreign investors who have expressed concern over timezone differences and consequent trade-matching failures. Supporters of the move say faster settlement reduces counterparty risk and trading costs.

The shift will boost operational efficiency as rolling of funds and stocks will be faster, said Suresh Shukla, joint president at Kotak Securities Ltd.

The US Securities And Exchange Commission has sought stakeholder views on moving to a one-day settlement cycle and an industry body in Europe is discussing the same.

“Shortening the settlement cycle should reduce the amount of margin that counterparties would need to post with clearinghouses,” SEC Chair Gary Gensler said in the paper. “As the old saying goes, time is money.”