The country's stock exchange, depositories and other market infrastructure institutions have come up with a roadmap to implement the market regulator's plan to introduce a T+1 (trade plus one day) settlement cycle next year.

The new settlement mechanism will kick off in a phased manner from February 25.

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

The exchanges will first rank all listed companies based on the daily average market capitalisation for the month of October. The 100 companies that rank at the bottom of the list will be the first to switch to the T+1 settlement cycle.

From March next year, the next 500 companies at the bottom of the list will move to the new settlement cycle on the last Friday of every month. This means that all the listed companies will move to the T+1 settlement cycle by the end of the year assuming there are no glitches in implementation.

It may be recalled that soon after market regulator Sebi announced its plan to introduce the T+1 cycle, foreign portfolio investors (FPIs) had voiced concern about the move, arguing that migration to the settlement would require changes that are more complex at their end.

They also claimed that they would be impacted due to time zone differences and the involvement of multiple parties like global and local custodians in different jurisdictions. They had also said that the US SEC had given a two year roadmap in 2021 for migration to T+1 from T+2.