Settlement holiday for stocks, funds but markets open: What does it mean

During a settlement holiday, the equity intraday profit credits and F&O credits aren't included in the trading balance or are not available for withdrawal

The Reserve Bank of India has rescheduled the Eid-e-Milad holiday to Wednesday, September 18, moving it from the originally planned date of Monday, September 16. This announcement comes after a similar announcement from the Maharashtra government.

Stock broker Zerodha explained that given the announcement, September 18, will be a settlement holiday. During a settlement holiday, the settlements of funds and stocks would not take place even though the exchanges are open for trading purposes. This happens when banks in Maharashtra are closed, but trading on exchanges is open, Zerodha co-founder Nithin Kamath explained in his social media posts on Monday.

“Most brokers don’t allow shares bought on Friday to be sold on Monday because of this (settlement holiday). We, Zerodha, are among the few brokers that allow you to sell stocks bought on Friday,” he said.

What happens to intraday profit credits on settlement holiday?

During a settlement holiday, equity intraday profit credits and F&O (Futures and Options) credits are not included in the trading balance. They cannot be withdrawn until after the holiday.

This means that purchase and redemption orders placed in liquid and debt schemes after 2 pm on September 17 will be processed on September 19. Moreover, the allotment and redemptions due on September 18 will be settled a day later. For Equity schemes, orders will be processed on September 18, Zerodha explained in a blog.

Stock broker, Paytm Money, in an old blogspot, explained this using examples to better understand how funds will act during a settlement holiday. If a user makes intraday profits on February 18 (Rs 5,000), these profits will be reflected in their account balance after the settlement holiday, assuming the holiday is on February 19. Similarly, if a user had credits of Rs 20,000 arising out of February 18 in the F & O segment then they will receive the Credit of Rs 20,000 in the F & O segment on the business day after February 19.