Zerodha's Nikhil Kamath: Depository outage hits T+1 settlement, triggers cascading market impact

A technical issue at one of the country’s depositories disrupted the T+1 settlement cycle this week, leading to delays in share credits, payouts and auctions, and triggering a cascading impact on market operations, Zerodha co-founder and CEO Nithin Kamath said.

In a post on X, formerly Twitter, Kamath explained that the problem arose due to a technical issue affecting inter-depository transfers at one of the depositories, which prevented the normal movement of shares between sellers’ and buyers’ demat accounts for trades executed earlier in the week.

There

was a technical issue at one of the depositories this week that disrupted settlement and had a cascading effect on the market. Since many people may not fully understand how settlement works, let me explain what happened.

When you buy or sell stocks, the trade settles on…

— Nithin Kamath (@Nithin0dha) February 7, 2026 

He said that under the T+1 settlement system, the Clearing Corporation (CC) determines net obligations, basically identifying who owes shares and who owes money, and instructs depositories such as NSDL and CDSL to move shares through brokers acting as depository participants. This pay-in and payout of shares is a critical part of the settlement process, enabling the CC to identify completed obligations and short deliveries.

According to Kamath, the disruption on Wednesday meant that shares from Tuesday’s trades were neither credited nor debited in investor demat accounts. As a result, the CC was unable to identify short deliveries or conduct auction sessions to resolve existing settlement failures.

The incomplete settlement also affected investors and brokers. Shares bought by clients remained stuck in pending T+1 status, and since these could not be earmarked at the depository, clients who sold such shares were unable to receive their sale proceeds.

Also read: We’re living in a world where a regulator can shut you down in a jiffy: Zerodha’s Nikhil Kamath

Kamath said the issues persisted through Thursday and Friday, with settlements progressing slowly and remaining incomplete for trades from earlier days. He added that the backlog was expected to be cleared over the weekend and that settlement operations were likely to return to normal by Monday.