Settlement Holiday and its Impact

April 10, 2013

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Traders,

What is delivery based equity trading?

When you buy stocks and hold it overnight, we call it delivery based equity trading. If you buy/sell stocks and exit it before 3.30pm, it is called intraday trading.

What type of account is required to trade delivery based equity?

You will need a trading account through which you would be buying and selling stocks. Stocks bought would be credited to your demat account and if you have sold delivery stocks, such stocks would be debited from your demat account. Note that demat account is very similar to your bank locker and demat account is required only for trading equity (intraday or delivery) and not for trading F&O.

What is a settlement?

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settlement delay

When trading stocks in India, equity settlement happens on T+2 days. ‘T’ meaning the trade day or day you traded.

So for example if you bought shares on Monday(T day), the shares will be credited to your demat account on Wednesday( Monday is T day, Tuesday is T+1 and Wednesday is T+2 day).

Similarly if you sold the shares on a Friday(T day), the funds will be available for withdrawal on Tuesday (Monday is T+1 day and Tuesday is T+2 day. Saturday and Sunday are not considered as working days).

Both the cases above are called as Normal settlement, but once in a while we have these situations when exchanges are open but depositories are closed.

Exchanges are where you have your trading account, so you will be able to buy/sell, but since depositories are closed, you will not be able to take delivery of shares on those days to your demat account.

3 things all of you need to be aware of is that when you buy stocks for delivery (using product type as CNC):-

  1. On Zerodha, Your stocks on T+1 day will show in T1 holdings, Click here to read the risks of selling stocks before taking delivery from your T1 holdings.
  2. On Zerodha, Your stocks on T+2 day will also show in T1 holdings because the delivery of stock happens only on T+2 evening.
  3. On Zerodha, Your stocks from T+3 onwards will show in demat holdings.

Settlement Holiday?

We have 3 stock exchanges in India NSE, BSE, MCX-SX and 2 depositories NSDL and CDSL.

What happens when the stock exchanges are open and depositories which hold your demat accounts are closed? It basically causes confusion and this blog is intended to educate you about the same.

The stock exchanges are open on Thursday, April 11th 2013, but it is a settlement holiday(depository holiday) on the occasion of Ugadi/Gudi Padwa.

Stocks which you had bought on April 9th/Tue would be delivered to you on April 11th afternoon, but April 11th is a depository holiday. So the shares will be delivered to you on April 12th evening. The issue with this is that what you bought on 9th will show in T1 holdings both on 10th and 11th. But on 12th it won’t show you either on T1 holdings or on demat holdings. The reason being it is neither a T1 position nor a delivery position. Since it won’t show up in either T1 or demat, you will not be able to sell these shares bought on 9th on the 12th. You can sell them anytime after 12th.

Stocks bought on April 10 (Wed), would reflect in T1 Holdings on April 11 (Thu) and April 12 (Fri). Ideally the stocks would have gotten credited to your demat account on April 12 (Friday Evening) and would have shown in your Demat Holdings from April 15 (Monday Onwards) but since Thursday was a DP holiday, the stocks would be delivered only on Monday (April 15) [T+1 Day being Friday and T+2 Day being Monday] instead of Friday (April 12).This means that stocks bought on April 10 (Wed) would not show anywhere on April 15 [Monday] and would show under Demat Holdings from April 16 (Tuesday) onwards.

You don’t need to worry much because it is only a few times a year that the depositories are closed but the stock exchanges are open. The following are such days for the year 2013:

Click here to see holiday calendar on NSE/BSE/MCX-SX.

The days which are holidays for depositories but not for the exchange are the following for 2013:

1.  25th Jan 2013 Friday Id-E-Milad
2.  19th Feb 2013 Tuesday Chhatrapati Shivaji Maharaj Jayanti
3.  1st Apr 2013 Monday Annual Closing of Banks
4.  11th Apr 2013 Thursday Gudi Padwa/Ugadi
5.  1st Jul 2013 Monday Annual Closing of RBI
6.  30th Sep 2013 Monday Half year Bank Closing

Here’s an example, assuming you only buy and have not sold the purchased stocks:

Day of Week Trade Executed    Position on Terminal
Monday Bought Reliance
Tuesday Bought TATA Steel Reliance in T1
Wednesday (Depository Holiday): Reliance in T1, TATA Steel in T1
Thursday NO RELIANCE, TATA Steel in T1
Friday Reliance in Demat Holding,No TATA Steel
Saturday Onwards Both Reliance and Tata steel in Demat

Again in brief, If today is a settlement holiday but exchanges are open then:

1. Stocks bought for delivery day before yesterday, I cannot view/sell it tomorrow(next working day)from either T1 or demat holdings.

2. Stocks bought yesterday, I cannot view/sell it day after tomorrow(2nd working day from today) from either T1 or demat holdings.

Hopefully this clarifies any query you might have on the impact of a settlement holiday when the exchanges are open.

Happy Investing,

Nithin Kamath

Founder & CEO @ Zerodha, team working towards breaking all barriers that I personally faced as a retail trader for over a decade. Love playing poker, basketball, and guitar. Getting body fat % in single digit is the next personal endeavor :) .

52 comments

  1. drsuhask says:

    Dear Sir / Madam,
    I ( client ID RS1654) sold GildM futuire May on 29/04/2013 at 27267 . This position got profit ( almost 645 points) till today. Today at about 7.25 pm I recieved a call from Zerodha trading executive telling me to squarre off the position. The reason he was telling that I have to take the delivery of the position which is risky. So I squarred off the position without any hesitation as I have experienced the occasion in which the care was taken by Zerodha to curtail loss of the clients ( my wife is having equity trading account with Zerodha from last 10 months)
    But actually I wanted to continue the position as I initiated the trade by seeing the charts only & accordingly profit target was of 1500 points. I don’t know the trading rules in commodity market as I am very new in the commodity trading ( 15 days only).
    I just wanted to know what care should have taken from my side to continue the position so that I will take care next time.

    Yours Faithfully,
    Dr.Suhas Kothavale

    • Nithin Kamath says:

      The blog above is for equity and not for commodity. Don’t mistake the above blog as an answer to your query.

      The answer to your query:

      Gold futures which you trade on MCX is a compulsory delivery commodity once it hits the compulsory delivery period. Compulsory delivery period happens 5 days before the expiry date.

      So what this means is that if you trade the 5th June gold future contract, 5 days before this date, gold futures goes into compulsory delivery. What this means is that during this period there is a chance of getting assigned delivery if you are holding a gold future contract.

      So what this means is that , if you are long gold futures(the big one 1kg), you will have to pay 100% of the amount( around 30lks) and take physical delivery and if you are short gold, you have to give delivery of 1kg of gold as specified by the exchange. The delivery happens in Ahmedabad typically, so all of this can cause a lot of confusion and a possible loss.

      Hence it is best to square off all positions of gold 5 days before the expiry and roll it over to the next expiry if you intend to continue.

      Cheers,

  2. tin6tin9 says:

    i have query on settlement price of nifty future.
    say for month of april2013, 25th april at 3.30 pm the closing price of nifty 5916 is the ultimate settlement price ?
    if i bought nifty fut @ 5900 then my profit would be 16*50 – brokerage.?

    • Nithin Kamath says:

      Sorry for the late response. Yes 16*50 – brokerage and all statutory charges. Check out our Brokerage calculator for this.

  3. jayshil says:

    But in normal case one can sell stock on T+2 or not?

  4. sachin says:

    For f and o if I want to hold the product overnight whhich option shud I select like mis

  5. Madhav says:

    nithin sir, does settlement holiday have any effect on stock/index futures?

  6. DS2697 says:

    Hi there,

    My query is I bought shares in Equity under the product type MIS and later converted it to CNC.

    1. Will I be able to still sell on the T-day under CNC.
    2. Is there any charges for making the conversion from MIS to CNC and back on the same day.

    Cheers

  7. VSKumar says:

    Dear Zerodha,
    I am holding 525 shares of Prestige at 262…
    If I have sold 500 shares of them on T+2 day under CNC at 264 and again buy back them in CNC at 260…
    Then the shares are again considered as T+1 or the trade is considered as MIS and kept in same as T+2…??

    Regards,

  8. sam says:

    shares bought on 31 mar 15 could not be sold today due some settlement.
    For these sort of things I request to some intimation prior day via sms/ email
    Its not possible for us to find the blog update everyday

  9. aftab k khan says:

    Hi Nitin Sir

    1) i have 327 shares in my demat i sell 100 shares before settlement holiday, so remaining shares is 227. but now it’s showing 0 shares in holding is that settlement holiday impact ?

    2) if i sell 100 shares of X company rs 50 from my demat account, now i have 5000 rs balance available
    should i use these money for trading same day or i need to wait for t+2 days

    3) according to this if i trade same day after selling X company’s shares, the 5000 rs credited in my account after t+2 days so is it risky to trade with 5000rs same day after selling shares.

    • 1. Can u send this query to support@zerodha.com with client ID.
      2. You can use it the same day for buying more stocks.
      3. Selling shares and buying other stocks with that money is not risky. Buying shares and selling it before getting delivery is risky, as chances of short delivery.

  10. BGR says:

    Nithin sir,

    I am still not understanding why is settlement holiday is even considered in counting T1 and T2 quantities. In case of stocks purchased a day or 2 days before settlement holiday, why does the share vanish altogether after T1 day? In case of settlement holiday, can’t you just consider it as T1 even after 2 days after purchase and allow the transaction normally on the T+3 day? After all T1 means T+1 settlement day. Why do you even consider “number of trading days” instead of “number of settlement days”?

    For example, this year I bought a share on 9 november and 11 november was muhurat trading which was a settlement holiday. 12 november was also a trading + settlement holiday. So, on 13 when I tried to sell the stock, it had vanished completely as 13 was technically T+3 day (T being 9, T+1 being 10 and T+2 being 11) nut due to settlement holiday, the stock was not delivered and hence it was not shown as holdings or T1. Couldn’t it just be shown T1 ignoring the settlement holiday as a “0th” day?

  11. […] few additional holidays announced for Currency Trading and for Clearing & Settlement – NSCCL. Click here to understand impact of settlement […]

  12. DrRMMRao, says:

    Respected sir,
    I bought 100 Nos HDIL@73.25 under CNC ON 22.12.2015.Stocks purchased on 23 reflected in pi and q-zerodha.how this missed?
    Regards,
    DrRMMRao,
    BE,MBA-IT,PhD-Management

  13. amarjeet kumar says:

    Hi Nithin Sir,
    In day trading,
    what is the trading settlement of bank nifty & nifty future in zerodha ?

  14. Sharan says:

    I am holding few stocks purchased on 8th of FEB. Can I sell them tomorrow considering tomorrow being Depository Holiday?

  15. Unmesh says:

    Hi Nitin,

    Expiry settlement happens in case of Stocks also?
    Suppose I took Jindal Steel Call of Strike Price 60 and it closed at Jindal Steel closed for 60.50 on Expiry Day at 3.30pm, then what will be the settlement method?
    Please guide….

  16. Sachin says:

    According to this, stocks bought on 10 would show up in T1 Holdings on 11 (11 being Settlement Holiday) but just a few days ago, I’d bought Havells on 31 March & I couldn’t see it anywhere on 1 April. I even called up your desk to confirm since the margin was still blocked.

  17. Vimal says:

    Hello Sir,
    As I am a VERY beginner to trading and to Zerodha. I had buy 125 shares of CROMPGREAV but its under T1 holding. Should i able to sell these shares before completion of T1 settlement days ?

  18. Ra9685 says:

    I loss 5 lakh in market sir. How can I recover it sir

  19. […] In addition to the NSE and BSE holidays, the following holidays were announced for Currency Trading and for Clearing & Settlement. Find out more about settlement holidays and its impact on delivery based equity trading by reading our post here. […]

  20. […] In addition to the NSE and BSE holidays, the following holidays were announced for Currency Trading and for Clearing & Settlement. Find out more about settlement holidays and its impact on delivery based equity trading by reading our post here. […]

  21. Yukesh says:

    sir, can we trade in Futures on Settlement day..??

  22. RU0993 says:

    I have read this Blog. As per my understanding, stocks bought previous day of the settlement holiday will be shown as T1 holdings on the settlement day. But, in a bulletin (https://zerodha.com/marketintel/Bulletin/279) I could see that stocks I bought on 9th of Dec 2016 could not be sold on 12th of Dec. The 9th Dec is the previous trading day of the settlement holiday on 12th of Dec.

    Could you please clarify my doubts.

    • Stocks bought day before settlement holiday won’t show up on T1. If we show it and you sell it, it will lead to you short delivering as stock you bought before settlement holiday will come into your trading account only on T+3.

  23. Anand says:

    What is the meaning of (T1: 2) before my stock name?

  24. RAM B GORRE says:

    Nithin K, I am super frustrated and wanted to talk to you directly. Not sure how i can do it.

    I transferred some money from my commodity account to bank yesterday and till now 10:30am today, I didn’t receive it in my bank. I wanted to buy a stock and it was at super low.. as of now, it already went up by 3% from lows.. The only reason for my inability to trade is – Your delay in crediting money to my account. Why is that? Why can’t you deposit in 8am batch? An why can’t i receive it in less than 30 minutes? You can work on this with a charge if needed.

    Secondly, Why is transferring money from commodity to equity account is not possible? If this is govt regulation, then your withdrawal and deposit speeds must be fastened by a 1000 times.

    Now, I am like, money is there.. but not there..

    I have been trading with scottrade (in the US) and zerodha is no where near it in terms of quotes update..

    You GOT TO work on it!
    -ram

    • Ram, fund withdrawals have to be done through NEFT, and NEFT takes time. Not in our control, this is in the hands of RBI
      Equity to commodity is not allowed by SEBI.
      Quotes update on the terminal is also a function of how many ticks are changing on the exchange and we are also limited by the bandwidth constraints with Indian leased line providers. Comparing US to India may not really be the right way to do this. That said, for fund withdrawals we are working on adding an IMPS option for people who want it much faster. (IMPS would cost a little extra from the bank).

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