What does settlement cycle mean?
The settlement cycle refers to the time taken for a trade to be settled. The settlement cycle for all the instruments traded on the Indian exchanges is T+1 day, where T stands for the trading day.
Example scenario (Equity segment)
- Shares are bought on Monday (T day).
- They get credited to the demat account on Tuesday (T+1 day).
- Shares are sold on Monday (T day).
Funds get credited to the trading account on Tuesday (T+1 day). Funds can be withdrawn from the trading account after Tuesday evening.
Example scenario (F&O segment)
- A long/short futures or short position is initiated on Monday (T day).
- Any credit obligation of funds in the form of Mark to Market (MTM) or premium gets settled to the trading account on Tuesday (T+1 day). Funds can be withdrawn from the trading account after Tuesday evening. Any debit obligation of funds is settled on the same day, i.e. T day from the trading account.
It will take an additional day for the settlement process if there’s a settlement holiday. See What is a settlement holiday and its impact? , Market holiday calendar 2022 . Read more about clearing and settlement on Varsity by visiting zerodha.com/varsity/chapter/clearing-and-settlement-process.