Market hours extension - The Why, Gains & Pitfalls

 SEBI, the apex authority for the financial markets in the country has rejected the proposal for market timing extension put forward by the NSE. The market participants had varied opinions on this topic. In this blog, we will see the pros & cons of extending the market hours for Indian markets.

The proposal:

NSE proposed to extend the market hours for Indian markets in three phases. In the first phase it plans to extend the trading hours for index F&O instruments from 6 pm to 9 pm and gradually extend it till 11.30 pm in the second phase. And in the third phase, cash market trading will be extended till 5 pm.

The reason behind:

The present trading hours in the Indian market is between 9:15 am and 3:30 pm. Major markets like NYSE and London Stock Exchange offer slightly longer trading hours. The extension in market timing is not just additional trading hours but provides market participants with increased liquidity and timely responses to global events. This increase in timing would make Indian markets overlap with the American and European markets which would enable market participants to take timely and prompt responses to the global events, news which could have a significant impact on the markets.

These overlap hours would be crucial in times of a crash or global economic events that could have its impact on the markets. Since, information originating from one country has its impact on another country’s market, its is important to align Indian markets with the global markets.

The pros:

·       Market participants can take timely and prompt responses

·       Increased efficiency

·       Better price discovery

·       Alignment with global markets

The cons:

·       Work life balance will take a hit

·       Increased stress in traders

The bottom line:

Extending market hours might seem to have significant benefits, it also comes with its own set of drawbacks. Trading is one of the high stress professions and chronic stress is the root cause of many severe diseases. With an extension in timing the exposure to stress also increases. This will also cause infrastructural constraints for both the exchange and the brokers. On the flipside, Indian markets will be aligned more efficiently with the global financial system. This decision has both advantages and disadvantage, each holding its own significance.