Extended Market hours : Bleesing OR Curse for Indian Stock Market

India is one of the favorite places for foreign investor to place their money. It is not only the money that trades in stock market but it is an indispensable amount which we can’t even think of neglecting. India has got a growing economy and is a safe heaven. The economy has successfully overcome the affects of the economic downturn.
Trading in Indian stock market starts at sharp 09:55am goes on till 03:30pm, that means that it goes on for approx 5 hrs and 35 minutes. But the watch dog of Indian securities market has come with some new provisions of extended market hours. The new provision of SEBI says that now the trading will start at sharp 09:00am and will continue till 05:00pm. Although SEBI has said that the new time table will be implemented only after consulting with respective Stock Exchanges and Stock Brokers, but for this provision SEBI is having two conditions -

1- Efficient Risk Management System
2- Infrastructure Commensurate

Risk management system is an integral part for carrying out efficient clearing and settlement system.It contains some of the risk containment measures like capital adequacy requirements of members, monitoring of member performance and track record, stringent margin requirements, position limits based on capital, online monitoring of member positions and automatic disablement from trading when limits are breached etc. In India NSE was the first one to adapt this system). With the increase in trading hours trading activities will increase and it means the banks and financial Institution have to increase their market hours and for that the infrastructure that we have now has to be improve.

Reasons for increasing market hours -
some of the reasons as stated by SEBI to extend market hours are-

1. The events occurring in global geography have their effect on stock markets and specially the events happening in out side India have their effect on Indian Stock Market, thus the main reason is to align Indian stock Market with other Asian and global stock markets.
2. With the increased trading hours investors can assimilate information and take the investing decision accordingly.
3. The volatility, market efficiency stabilizes with the increase in trading hours.

Now the other very important thing comes in mind that what are the advantages of increased market hours. So some of the advantages can be counted as -
There will increase in the intraday day trading.

• As of now the trading begins as 09:55am and continues till 03:30pm without any break but with the increase in trading hours trader and investor can take a break in between and can reform their strategies.
• As market moves according to various news and sentiments so with the increased market hours the participants will get more time to react.
• We can experience some increase in NSE nifty as with the increased trading session Indian market will have better correlation with SGX Nifty.
• It may be possible that as a result of increased market hours we may be able to attract more foreign investors.
• Retail investors will get sufficient time to think about their buy-sell decision and strategies.

now the other side of coin means disadvantage of increased market hours...

• Most of the global markets which are trading for 8-9 hrs are having provision for lunch break of 1 hr in between in which they can reform their strategies but no such things are proposed by SEBI.
• The analysts will be require to enhance their efficiency.
• There will be increased pressure on the traders including FII’s, banks, institutions etc.

Whatever may be the reasons but there is mixed response from market participants. There may be one worry of price stability and may be some other factors also. If everything goes as planned then there will be increase in volumes, more intraday trading, and more inflow of capital from foreign investors, this will help to redirect more flow of money into the financial system.

Comments are most welcome...