T2T Stocks Means: What are T2T (Trade to Trade) Stocks?

Have you heard of the A, B, and T categorization of stocks? Trade to Trade (T2T) stocks come in the T category and exchanges move these stocks to this T list if they are highly speculative or illiquid in nature. These stocks need to be delivered and hence intraday trading and Buy Today Sell Tomorrow (BTST) trading are not allowed in such stocks. This article will look closely at what T2T stocks means, how they work, and how you can identify them.

What is T2T Stock​?

In T2T stocks trading, intraday and BTST trades are not permitted since all buy and sell transactions must be delivered (T+1 settlement). On T+1 day, the stocks you sell are deducted from your Demat account, and the stocks you buy are added to your Demat account.

It means that once you buy a T2T stock, you cannot see it until the T+1 settlement process is completed. Even if you try to sell the shares the same day or before they are credited to your Demat account, then the process will not be completed.

The stock exchanges periodically analyze the volatility of the stock and move it to the trade to trade stocks list in order to safeguard the investor’s interest.

How to Identify T2T Stocks?

It’s not always easy to identify stocks poised for significant gains. When seeking to identify T2T stocks, there are a number of factors to consider.

1. High PE Ratio

If the stock is overvalued in terms of the price-to-earnings ratio, then the exchange will transfer the stock to the T2T stock list. For example, if the Nifty’s PE is within the range of 15x – 20x, and the ABC stock is trading at a PE of 30x, then it will be considered for the T2T segment.

2. Higher Price Deviation

If the stock price is trading 25% (or a minimum of plus 10%) above the benchmark or sectoral index value, then it will be considered for the T2T stocks list.

3. Low Market Capitalisation

If the market capitalization of a company is equal to below the ₹500 crores, then the stock is transferred to the T2T segment.

How Stock Exchanges Select the T2T Stocks?

The SEBI and stock exchanges (NSE or BSE) jointly review the stocks on the basis of market capitalization, price-to-earnings ratio, stock price variation, volatility, volume deviation, client concentration, and a specified number of non-promoter shareholders. The stocks that are allowed in the derivatives segment are not considered in the trade to trade stocks.

These stocks are reviewed on a fortnightly (in two weeks) basis on their PE multiple criteria, price variation, and market capitalization. Also, the stocks that are already there in the A, B, C, or D categorization will be reviewed on a quarterly basis to add to the T2T segment.

List of Top 10 Trade to Trade Stocks

Here is the top 10 T2T stock list based on their market capitalization (as on January 21, 2025):

Things to Keep in Mind While Investing in T2T Stocks

Are you interested in investing in trade to trade stocks? T2T stocks can be a fantastic investment but wait; they can also be risky. Here are a few things to consider before making your choice.

1. Timing is everything

T2T stocks are notoriously volatile, so you must time your investment carefully.

2. Know your company

Trade to trade stocks are often associated with small, relatively unknown companies. Make sure you research the company thoroughly before investing.

3. Be prepared for the long haul

T2T stocks are not for the faint of heart. They can be very volatile in the short term, so it’s essential to have a long-term investment horizon.

4. Diversify your portfolio

T2T stocks should only make up a small part of your overall portfolio. Diversifying will help reduce your overall risk.

 5. Have a plan

T2T stocks can be a great way to achieve your investment goals, but only if you have a well-defined plan. Make sure you know exactly why you’re investing in a T2T stock before you do so.

Is Trade to Trade Stocks Safe for Trading?

There is no clear answer to the issue of whether dealing in the Trade To Trade stock is secure. It is determined by several factors, including the exact stock or asset being traded, market circumstances at the moment of trading, and the trader’s risk tolerance.

However, the trade to trade segment can be a dangerous place to trade, especially for inexperienced traders. This is because prices in the trade to trade sector can be more volatile than in other sections of the market, and there is less liquidity, making it difficult to enter and exit deals.

The trade to trade segment might be a fantastic area to uncover possibilities for professionals willing to take on additional risk. However, people who are new to trading or are not comfortable with taking on additional risk should definitely stick to other sectors of the market.

Conclusion

Trade to Trade stocks may be highly beneficial to both investors and public firms. It provides a steady investment environment for investors. It can offer liquidity for investors in public firms, which benefits both the company and the investors.

We hope this blog has helped you understand trade to trade stocks and their significance in the trading world. Explore and invest in T2T stocks by opening Demat Account with SMC Global Securities.

Frequently Asked Questions – FAQs

1. How long does a stock stay in T2T?

SEBI and the stock exchange review the T2T stocks on a fortnight or quarterly basis and rebalance the list based on market cap, price variation, and PE valuation of a stock.

2. What is the T2T rule?

The T2T rule highlights that stock is marked only on a delivery basis and no intraday trading will be allowed.

3. Is it good to buy T2T stocks?

T2T stocks are more suitable for investors who want to go with long-term investment and are satisfied with taking the delivery of shares and paying the entire amount to the seller.

Reference:
https://www.bseindia.com/corporates/List_Scrips.html

Author: All Content is verified by SMC Global Securities.