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<p>The Indian equity market is growing rapidly, supported by a diverse investor base and strong growth. The study's objective is to analyse the impact of T + 0 settlement on the cumulative abnormal returns and cumulative average abnormal returns of included stocks. The present study will also study the impact of post-T + 0 settlements on trading volumes. Using event study methodology for 2,5,10, and 20-day event windows and Dynamic Forecasting Technique, the paper analysed 25 selected stocks and observed its potential in reshaping market efficiency and liquidity. The findings indicate the semi-strong form of market efficiency reveals a mixed response across different stocks, suggesting that the impact of T + 0 settlement is not uniform. Some companies, notably <b>Vedanta, Indian Hotels, Tata Communications, and Hindalco</b> experienced significant positive abnormal returns, indicating an immediate positive reception of the shortened settlement cycle. Vedanta, in particular, showed a consistently strong positive trend across all event windows, culminating in a substantial 36% abnormal return over 20&#xa0;days. However, the companies like <b>Coforge, Birla Soft, and MRF</b> experienced significant negative abnormal returns, especially in the longer event windows. This outcome disparity suggests that the benefits of T + 0 settlement may be sector-specific or dependent on individual stock characteristics. Interestingly, while individual stocks showed significant movements, the cumulative average abnormal returns (CAAR) across all sample stocks were insignificant. While the T + 0 settlement had notable effects on certain stocks, its overall market impact remains subtle at this early stage. The volume analysis provides encouraging signs for the potential of T + 0 settlement. An average increase of 3% in trading volume across the participating stocks, even with the optional nature of the current implementation, suggests the willingness of market participants to receive this new settlement cycle positively. Dynamic forecasting technique also confirms the significant differences in the patterns of the above seven stock prices during the entire 41-day event window. Therefore, these contemporary results hold major inferences for the market regulator.</p>

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T + 0 Settlement: A Game Changer for the Indian Stock Market

  • 期刊论文

  • 发表日期：

    2025年6月20日

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  • Tejinder Singh,
  • Shalini Aggarwal,
  • Vikas Sharma

摘要

The Indian equity market is growing rapidly, supported by a diverse investor base and strong growth. The study's objective is to analyse the impact of T + 0 settlement on the cumulative abnormal returns and cumulative average abnormal returns of included stocks. The present study will also study the impact of post-T + 0 settlements on trading volumes. Using event study methodology for 2,5,10, and 20-day event windows and Dynamic Forecasting Technique, the paper analysed 25 selected stocks and observed its potential in reshaping market efficiency and liquidity. The findings indicate the semi-strong form of market efficiency reveals a mixed response across different stocks, suggesting that the impact of T + 0 settlement is not uniform. Some companies, notably Vedanta, Indian Hotels, Tata Communications, and Hindalco experienced significant positive abnormal returns, indicating an immediate positive reception of the shortened settlement cycle. Vedanta, in particular, showed a consistently strong positive trend across all event windows, culminating in a substantial 36% abnormal return over 20 days. However, the companies like Coforge, Birla Soft, and MRF experienced significant negative abnormal returns, especially in the longer event windows. This outcome disparity suggests that the benefits of T + 0 settlement may be sector-specific or dependent on individual stock characteristics. Interestingly, while individual stocks showed significant movements, the cumulative average abnormal returns (CAAR) across all sample stocks were insignificant. While the T + 0 settlement had notable effects on certain stocks, its overall market impact remains subtle at this early stage. The volume analysis provides encouraging signs for the potential of T + 0 settlement. An average increase of 3% in trading volume across the participating stocks, even with the optional nature of the current implementation, suggests the willingness of market participants to receive this new settlement cycle positively. Dynamic forecasting technique also confirms the significant differences in the patterns of the above seven stock prices during the entire 41-day event window. Therefore, these contemporary results hold major inferences for the market regulator.