MBF 2025-Wl-3960-An Assessment of the Impact of the T+0 Settlement Cycle on Market Liquidity and Price Efficiency in Indian Markets

A significant reform of the Securities and Exchange Board of India (SEBI) has been the introduction of the T+0 settlement cycle, which allows for the settlement of trades on the same day as the transaction. The shortening of the settlement cycle aims at enhancing market efficiency, reducing risk exposure, and improving liquidity. From an initial T+5 settlement cycle in the early 2000s, settlement cycles in India were progressively reduced to T+3 in 2002 and to T+2 in 2003. In 2021, SEBI introduced, in a phased manner, a T+1 settlement cycle, which was fully implemented by January 2023. The introduction of a T+0 cycle, in March 2024, is another significant milestone, making India one of the only markets to adopt such a short settlement cycle. This study is based on two sample data-sets, from 2024 and 2025. SEBI introduced the beta version of the T+0 settlement cycle, on an optional basis, effective March 28, 2024. This was gradually increased to 500 stocks, phase wise. The first phase, comprising 100 stocks, commenced from January 31, 2025. The study reveals that for both phases, the adoption of a T+0 settlement cycle, has not had a significant impact on either price efficiency or market liquidity.