India will be the world’s fastest market to settle deals after it switches to completely T+1 on Friday.

India’s stock market is expected to surpass the US and Canada as the one with the fastest settlement times for equity deals. All blue-chip and large-cap stocks in India, which account for 80% of the market capitalization, will be settled on a T+1 (today plus one day) cycle starting on January 27. To put it simply, if someone purchases a stock on Monday, it will be in their account on Tuesday.

Trade settlement takes place globally over a minimum of two days. The US and Canada have T+1 settlement plans as well. Market volumes may increase in the medium to long term as shares and cash start entering accounts more quickly, according to experts. Particularly, the quicker turnaround time is anticipated to guarantee greater cash market volume.

The Asia Securities Industry and the Financial Markets Association (ASIFMA) vehemently opposed the idea and cautioned that the differing time zones between Europe/US and Asia/Pacific may cause operational difficulties for investors, particularly when it comes to FX management.

ICI and the Association of Global Custodians (AGC), two other industry organizations, had previously issued cautionary statements. However, SEBI’s decision to roll out the T+1 regime gradually, starting with a small number of stocks and adding a few more each quarter, allowed overseas participants enough time to prepare.

Faster settlement cycles are in demand in the international financial markets because investors want their cash released as soon as possible, according to experts. Everyone wants to reduce settlement risk, especially in the wake of Covid. By lowering counterparty risk, a shorter settlement cycle also contributes to minimising systemic risk.

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