Is it likely that SEBI is planning to put off the implementation of its T+1 settlement cycle program?

SEBI is most likely to defer the implementation of T+1 settlement cycle, which was to take effect from 01-January 2022. After extensive protests from local brokers and from FIIs, the regulator has decided to find a middle path solution. The T+1, to begin with, will only apply to the bottom 100 companies by market cap and would be implemented from end of Feb-22. Foreign investors have also cited time zone differences as a major hassle for T+1.

Most of the FIIs manage their India positions out of Hong Kong or Singapore and they have to handle trade mismatches and also hedge their net forex exposure at the end of each day. FPIs have written to SEBI that all these would be tough to handle within just 1 trading session. Currently, trades on Indian stock exchanges are settled on T+2 basis, which is practice in markets like Singapore, Hong Kong, Australia, Japan, and South Korea.

Many market experts have also opined that moving stocks within the Nifty 50 to the T+1 cycle could prove risky if liquidity dries up or if the global investors opt to halt trades. By selecting the bottom 100 stocks, the systemic risk would be a lot lower. This would also give enough time for the market infrastructure to catch up. Interestingly, Taiwan which had moved from T+2 to T+1 system had decided to move back to T+2 for practical reasons.