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NISM Certifications · NISM-Series-XV: Research Analyst · Corporate Actions

A company declares a cash dividend with a record date of Thursday under the T+1 settlement cycle in India. Assuming no holidays, on which day does the share start trading ex-dividend?

The share trades ex-dividend on Thursday, the record date itself. With T+1 settlement, shares bought on Wednesday settle on Thursday and qualify, so Wednesday is the last cum-dividend day and the ex-date coincides with the record date.

  1. AThursday, the record date itselfCorrect
  2. BFriday after the record date
  3. CWednesday, one trading day before the record date
  4. DTuesday, two trading days before the record date

Explanation

Under T+1, a buyer must purchase by the day before the record date to be settled on the record date. Actually buying on Wednesday settles on Thursday, so Wednesday is the last cum-dividend day and the stock trades ex-dividend from Thursday, the record date. Friday is too late and the earlier days are the old T+2 pattern.

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