Indian stock markets have evolved over years, these days much faster than ever. Earlier the settlement cycle for shares was T+3 days back in 2003. For folks like me who have been tracking markets for a long time, this was 14 days when shares were traded and transferred in physical form.
SEBI recently has given guidance to Stock Exchanges to adopt T+1 settlement based on their readiness from 2022. This is interesting, India is moving towards faster settlement cycles for shares. We thought this would be a great opportunity for us to introduce a new feature on Dhan - Pre-Delivery for our users. Some of our users have been using this for the past week, and today we are opening this for all.
What exactly is Pre-Delivery?
Pre-Delivery is a better version of the good old BTST (Buy Today and Sell Tomorrow) orders wherein you could buy stocks today and sell them tomorrow (before they are delivered to your Demat account on T+2 days).
What have we done differently on Dhan?
Most stockbroking platforms that we have seen show your T+1 holdings merged in the portfolio the next day of when your trades are executed. Now if you are already holding more shares of the same stock, you don’t know which stocks you are selling - the new ones or the old ones. If you sell old ones, which are older than 1 Year - then there are tax implications to your execution decision. Or even simpler, your stocks are averaged out by buying price the very next day, hence you possibly miss out on making a profit if there is a significant increase in price the very next day or cut loss if there is a significant correction on the next day.
We made it simpler on Dhan -
Your T+1 holdings now appear separately under the Pre-Delivery section in Orders
If you sell, you sell your T+1 holdings, and not from your Portfolio or Demat Holdings
The one-day gain or loss is prominently visible for your T+1 day
You can choose to exit one position at a time, or all of them at once
Pre-Delivery on Dhan is also future proof
When exchanges implement the T+1 settlement from 2022, this will not be applicable for all stocks at the same time. So the ones exchanges move to the T+1 settlement cycle will automatically settle on the next day and with Pre-Delivery you will always have the option to take a delivery on T+2 or exit the same on T+1.
Should you sell all kinds of stocks on Pre-Delivery?
Technically you can, but we would recommend you use this only for very liquid stocks that are traded in high volumes. Remember, you are selling shares that you don’t own because the seller from whom you have purchased them is yet to give them to you and hence not in your Demat account yet. If the seller defaults on giving delivery of your shares, this will be termed as short delivery, and in such an event, you will face an auction penalty by the stock exchanges which may be up to 20% of the stock that was short delivered.
Hope you enjoy this awesome Pre-Delivery experience that we built for you. As always, we are making sure that we’re improving Dhan based on your suggestions and feedback. Feel free to share more on Dhan Community or write to us at feedback@dhan.co
-Jay
Cofounder, Dhan
