Cash Contract

A cash contract is an agreement to buy or sell a financial instrument or commodity for immediate delivery and settlement — with payment and transfer of ownership occurring on the spot date, typically within one to two business days of the transaction. Cash contracts are the opposite of forward or futures contracts where delivery and settlement occur at a specified future date. In Indian equity markets, the cash market (also called the spot market) operates on a T+1 settlement cycle — trades executed today are settled by the next business day with shares delivered to the buyer's Demat account and payment credited to the seller's bank account through the exchange's clearing corporation. Cash contracts are the standard mode for equity delivery trading on NSE and BSE — when a retail investor buys shares of Reliance Industries through their Ventura trading account for delivery, they are entering a cash contract with settlement obligations on T+1. In the foreign exchange market, the cash or spot rate represents the prevailing exchange rate for immediate currency delivery. In commodity markets, cash contracts involve the actual physical delivery of the commodity (cotton, wheat, gold) at the current spot price, distinguishing them from commodity futures where delivery is at a predetermined future date and price. Understanding cash contracts versus forward or futures arrangements is foundational knowledge for Indian investors navigating different market segments.