India's equity markets will complete a shift to a one-day settlement cycle on Friday, with 256 large cap and top mid-cap stocks, including Nifty and Sensex stocks, set to come under T+1 settlement.

With this, India will become one of the few markets alongside China to have such a short settlement cycle.

A T+1 cycle means that if an investor sells a share, they will get the money within a day, and the buyer will get the shares in their accounts also within a day. A shorter settlement cycle also frees up capital and reduces risk of outstanding unsettled trades.

More than three-fourths of the stocks were already being settled in a T+1 cycle. "The experience has been seamless so far, which is giving comfort to the market that the last phase will also go smoothly,” said Nirav Gandhi, chief operating officer, JM Financial.

India began the transition to a shorter settlement cycle in February 2022 with smaller stocks. The final phase, kicking-in on Friday, will cover stocks accounting for close to 80% of market capitalisation of India's equity markets, including those under the futures and options segment.

While it was earlier planned that the transition will be completed by February 2023, the regulator and exchanges fast tracked this.

“The regulators and exchanges had comfort from the market participants to prepone the last phase of the migration to one day settlement,” said a regulatory source. (Reporting by Jayashree P. Upadhyay)