Two decades ago, India transitioned to the T+2 (trade-plus-two) system of equities settlement. This meant that buyers and sellers of stocks would get their shares and money, respectively, two days after the transaction. Earlier, investors had to wait three days for the same in what was billed as the T+3 system. But on 27 January this year, Indian bourses adopted the one-day cycle, becoming only the second country in the world after China to do so. Under this, shares are delivered and settled on the following day of the trade. Even the more sophisticated markets, such as the US, haven’t yet implemented it. However, this transition was dotted with roadblocks, with opposition from foreign portfolio investors (FPIs) posing the biggest challenge. FPIs have complained that the Securities and Exchange Board of India (Sebi) did not consult them during the roll-out process. Many of these foreign investors who operated out of different time zones across the world and invested in Indian stock markets feared they would have to arrange cash even before the transaction actually transpired. There were apprehensions of a potential FPI pullout and an ensuing bloodbath on Indian bourses post the rollout. As things stand, the new system is finally in place. Initial assessments suggest it is working well. There has been no knee-jerk reaction from FPIs. So far, so good. it's a road ahead is littered with some more speed bumps, which could test the true mettle of this settlement system.
