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?
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):-
- 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.
- 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.
- On Zerodha, Your stocks from T+3 onwards will show in demat holdings.
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.
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|
|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.
Effective April 2016, we have made changes in our backend to allow selling stocks from T+2 day onwards. Accordingly, in the current scheme of things:
1. Stocks bought one day prior to settlement holiday, will not be shown/available for selling on the actual day of the settlement holiday.
2. These stocks will be shown on the trading platform and will be allowed to sell one day after the settlement holiday. These stocks, however will continue to show up on Q, your backoffice on all days.