Dear Manjul,
It depends on the seasonal behavior you are going to consider. For example, you can divide the whole year (water year) into two periods such as dry and wet period. In that case, you will take recharge in wet period and assume no recharge in dry period. So, you will take two stress periods. If you simulation period is 30 years, then your stress periods will be 60. all this thing is true for groundwater flow modelling. each stress can be divided into smaller time periods such one month, 15 days, 1 day etc. depending on your work and choice.
But if you further want to do transport modelling, then you have to take smaller stress periods than flow modelling (plz refer to MODFLOW manual and MT3DMS manual). In that case, you need to divide the previous time step into smaller smaller part, such 1 min, in that case a flow model time step of 1 day will be further divided into 60 time steps. This will be done because you need to establish the numerical convergence criteria and courant no. etc.
thanks