Outrage among foreign portfolio investors over T + 1 settlement

MUMBAI: Foreign Portfolio Investors (FPIs) have expressed displeasure over the decision of the Securities and Exchange Board of India (SEBI) to allow the stock exchanges to move from T + 2 to a new T + 1 settlement as per their voluntary alternative to the stock market from January 1, 2018. It is also reported to have warned to be prepared for the serious consequences of turning to the system.

The FPIs have written a warning letter to SEBI for this and some of these FPIs have also indicated their plans to turn to MSCI and FTSE-Futsi Russell for giving a global index. Moving Indian stock markets towards T + 1 settlement will make the domestic capital market less attractive to global investors as investors are now looking at India as a pre-funding market as experts believe that the need for money before stocks are met.

Indian stock markets have seen many remarkable and beneficial developments since the Indian stock markets turned to the T + 2 settlement. The attraction of foreign investors has also been seen growing in Indian markets. So foreign funds say they do not want these benefits to be reversed by the new system.

As the new system ignores key risk factors, the Association of Global Custodians has written to SEBI Chairman Ajay Tyagi. The association includes 12 foreign banks. At present, in a global perspective, China is running on the only T + 1 settlement cycle. The US also has a T + 2 settlement.