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What does settlement cycle mean?

Indian stock exchanges followed a T+2 settlement cycle for equity and T+1 for F&O. However, all instruments are moved to a T+1 settlement cycle from 27th January 2023. To learn more, visit tradingqna.com/t/change-in-settlement-cycle-for-all-securities-from-friday-27th-january-2023/142552

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)

Buying shares.

  1. Shares are bought on Monday (T day).
  2. They get credited to the demat account on Tuesday (T+1 day).

Selling shares.

  1. Shares are sold on Monday (T day).
  2. 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 Funds can be withdrawn from the trading account after Tuesday evening.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)

  1. A long/short futures or short position is initiated on Monday (T day).
  2. 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 Funds can be withdrawn from the trading account after Tuesday evening.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.