When a new person starts investing in a stock market he faces much technical confusion like what is the T+2 trading day? or why purchased shares are not transferred to my Demat account immediately? and many more.
In his article, we will be learning about a is few of these technical things for stock market beginners in brief with the focus on “How to sell t1 holding in Zerodha?”.
What is the settlement cycle in the Indian stock market?
In India, we follow the t+2 settlement cycle.
This means when you buy shares in the form of delivery, the shares will be credited to your account after the completion of 2 days plus the trading day on which you placed the order.
But in this settlement cycle, the total cost of shares you are purchasing will be blocked along with transaction costs like STT, GST, brokerage, etc. in order to complete the transaction and a contract note will be issued.
If you place a delivery order with your broker on Monday to buy 1000 shares of Reliance Industries then the shares will be credited to your Demat account on Wednesday.
In this example ‘T’ means the trading day i.e. Monday and the two days are Tuesday and Wednesday. The cost of the 1000 shares of Reliance Industries Ltd. will be blocked on Monday along with the other transaction cost like STT, GST, etc.
What is t+1 holding in Zerodha?
When you buy shares on delivery with a view of holding it for the longer term for example 2, 3 or 10 years but the management take a decision which you don’t agree with or there is a fundamental change in the industry like free internet data by on of the player, many more.
In this scenario, you may think of selling the shares on the next trading day and recover back the invested funds as soon as possible.
In such a case you can sell the stock the next day by using the feature called BTST (i.e. buy today, sell tomorrow) explained in the next part of the article.
How to sell t1 holdings in Zerodha?
You can sell t+1 holding in Zerodha if any of the undesired circumstances come to light later.
For this, you need to use BTST (buy today, sell tomorrow) option available with Zerodha and some other brokers. Under this option, you can buy shares, and sell them on the next day.
This feature is available with most of the brokers but few brokers may not have this facility. Also, there is some risk with this kind of transaction covered later in the article.
Step by Step Process of selling t+1 holding on Zerodha.
- Login on your Zerodha account kite app and web.
- You will see your t+1 holdings separately will other holdings.
- Select the holding you want to sell and click on the three dots beside your holding (as shown in the above image).
- Click on the Exit option after clicking on three dots.
- Now the share will be sold after you complete the process and put in the pin and code received from CDSL by email and SMS.
What are the chargers of the T+1 transaction?
Many of the brokers including Zerodha do not charge separate charges if you sell t+1 holdings but you have to pay regular charges as per your agreement.
Also, you should read your own agreement or contact your own broker to inquire about the same.
As you going to sell your holding before completing the transaction you may be charged by the stock exchange a 20% penalty if there is a shortfall.
It is most likely that there will not be a shortfall but you should be aware of this problem. This usually occurs in illiquid stocks.
Trade to trade segment.
A key point to remember is an investors cannot sell shares in t+1 holding if these shares are under trade to trade segment.
Investors have to take the delivery of their shares by completing the t+2 trading cycle under this segment.
The list of shares covered under trade to trade segment is available on NSE and BSE websites which are updated regularly.
All in all, you can sell t+1 holding shares with Zerodha and any other brokers who provide this service there are no extra charges for this transaction but you may have to pay a 20% penalty if there is a shortfall.
Also, share in trade to trade segment cannot be sold under t+1 holding period you need to take the delivery under the t+2 settlement cycle.
I (financialwizardindia.com) am not a SEBI registered investment advisor.
This article is for information purposes only any scheme or company name mentioned here is just for example & not a recommendation.