Indian stock markets are embarking on a shorter settlement cycle or T+1 regime for the final list of large stocks from Friday, a move that will help reduce margin requirements for clients and boost retail investment.

T+1 (trade plus one) means that market trade-related settlements will need to be cleared within one day of the actual transactions taking place. Earlier, trades on the Indian stock exchanges are settled in two working days after the transaction is done (T+2).

The stock exchanges —NSE and BSE — in November 2021 in a joint statement announced that they will implement the T+1 settlement cycle in a phased manner, starting February 25, 2022, with the bottom 100 stocks in terms of market value.

Thereafter, 500 stocks were added based on the same market value criteria from the last Friday of March and so on every following month.

From January 27 onwards, all trades in the equity cash segment (including futures and options on stocks) will be conducted on a T+1 basis.

The final batch of securities — including stocks, ETFs, debt instruments, real estate investment trusts (REITs) and infrastructure investment trusts ( InvITs) — will be moving to the T+1 settlement cycle from Friday, information available with the Zerodhawebsite showed.

This is not the first time that markets regulator Sebi has chosen to shorten the settlement cycle. Earlier in 2002, the capital markets regulator had cut the number of days in the settlement cycle from T+5 days to T+3 days, and then in 2003, it was reduced to T+2 days.

Market experts believe that the T+1 settlement system will allow the cycle of money to move faster without waiting for an extra day.

Upside AI co-founder Atanuu Agarrwal said most markets around the world function on a T+2 basis. T+1settlement puts India ahead of even the US, which is the pre-eminent destination when comes to capital markets.