Understanding Settlement in the Stock Market: What Happens After You Buy a Stock?
Most traders understand how to place a buy order.
But very few understand what happens after the order is executed.
When you buy a stock like Bajaj Auto, how does it come into your Demat account?
Why does it appear the next day—not instantly?
Why is it called T+1 settlement?
Let’s break this down in a simple story.
1. The Moment You Buy a Share (Day T)
Suppose you buy 1 share of Bajaj Auto on Monday.
- Your order gets executed
- The stock appears as a position or holding (pending) in your trading app
- But it does NOT come into your Demat account immediately
Why?
Because the Indian stock market follows a strict settlement cycle.
Earlier, markets followed T+2 (two working days after transaction).
Now India uses T+1 settlement, one of the fastest systems in the world.
2. What Does T+1 Settlement Mean?
T = Transaction day (Monday)
T+1 = Settlement day (Tuesday)
So if you buy a stock on Monday:
- You pay the money on Monday
- You receive the shares on Tuesday in your Demat account
This one-day gap is not a delay.
It’s the official settlement process handled by:
- Stock Exchange (NSE/BSE)
- Clearing Corporation
- Depository (NSDL/CDSL)
3. Step-by-Step Breakdown of T+1 Settlement
Step 1 — You Buy Bajaj Auto (Monday)
Your broker forwards the order to the exchange.
The trade is matched and executed.
Step 2 — Clearing Corporation Confirms Trades
The clearing corporation ensures:
- Buyer gets shares
- Seller gets money
It acts as a guarantee in every transaction.
Step 3 — Depository Updates (Tuesday)
NSDL/CDSL transfers the shares from seller’s Demat to your Demat.
Step 4 — Shares Become Visible in Demat
On Tuesday (T+1) evening, the shares officially appear in:
- Your Demat account
- Holdings section of your trading platform
Now you fully own the shares.
4. What Happens If You Sell Before Settlement?
This is called BTST (Buy Today, Sell Tomorrow).
You can sell shares on Tuesday even if settlement is not yet complete.
The market allows it because the clearing corporation guarantees your trade.
5. Why Settlement Day Matters
Understanding settlement is important for:
✔ Delivery trading
You know exactly when shares enter your Demat.
✔ BTST trades
You know when you can sell early.
✔ Dividend eligibility
To receive dividends, your name must appear in the company’s record after settlement.
✔ IPO listing
IPO shares appear only after settlement is completed.
6. Example Timeline: Buying Bajaj Auto Shares
| Day | What Happens |
|---|---|
| Monday (T) | You buy Bajaj Auto; trade executed |
| Monday Evening | Shown as “Pending Delivery / Positions” |
| Tuesday (T+1) | Clearing & settlement begin |
| Tuesday Evening | Shares come into your Demat account |
| Wednesday onwards | You fully own the shares; can sell anytime |
7. Key Takeaways
- Indian markets use T+1 settlement
- Buy on Monday → Shares come on Tuesday
- Your money is deducted instantly
- Your shares are credited after clearing
- Exchanges, clearing corporations, and depositories handle the back-end
- BTST lets you sell before settlement
This is how every single equity delivery transaction works behind the scenes.
%20(2).png)
0 Comments