3 Things That Happen to the Markets While You Sleep

Just like there is a time for worshipping the goddess during Navratri, there is specified time for trading in Indian stock markets. While the Navratri timings can start from early in the morning, and last up to 9pm, the stock market clock moves from 9.30pm to 3.30pm. This means you can trade only during the specified market hours. As an investor, you must keep in mind that the bulk of trading in Indian stock markets occurs in the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). While the equity benchmark index for NSE is National Stock Exchange Fifty (NIFTY), also known as Nifty 50 and CNX Nifty, the benchmark for the BSE is Sensex, also called S&P BSE Sensex. NIFTY comprises the stocks of the top 50 traded companies, while Sensex has the top 30 companies, whose stocks are traded actively. In terms of trading volume, the NSE is the largest in the country. Both stock exchanges have similar trading mechanisms via an open electronic limit order book, where order matching is conducted by the trading computer. Both are regulated by the Securities Exchange Board of India (SEBI), and have the same trading hours and settlement process. Both follow T+2 rolling settlement, where any trade gets settled after two working days. And, because of market volatility, and other factors, the equity benchmark, at times, suddenly dips or rises, overnight. 

Another key point to remember as an investor is that even after the stock exchanges in India close, there is a considerable trading action taking place in markets around the world. This is because of the difference in the time-zones. It means that while you are sleeping stocks worth millions are being traded across global stock markets, like those in New York, Japan, Australia, Hong Kong etc. Wondering what exactly happens during the night? Fret not, celebrate the colours of Navratri with the market, while we tell you what exactly transpires in the stock markets – across the globe – while you are sleeping. 

Equity movement: In the present-age, international traders actively invest in foreign market equities, like the markets in Asia and Africa. Did you know that in 2021, Reliance’s Jio platforms will be listed on NASDAQ – an American stock exchange? This means that American markets will influence Reliance’s stock prices on a daily basis. 

A large number of foreign investors have now started investing in Indian markets, because of the country’s high growth potential. India is among the BRICS countries, demonstrating an exponential economic growth over the last two decades. Investors from foreign countries today invest in Indian markets to build a diverse and global investment portfolio along with the motive of getting high returns from a fast-growing market. Over the last few years, stocks of technology and tech-driven start-ups have gained momentum, thus attracting over $20 billion in investments. Along with investors – both individual and institutional – from the United States, those from countries, like Japan, the UAE, Europe, the UK and Canada have also started investing in Indian markets.  The RBI has provided for the Portfolio Investment Schemes (PIS) to allow Foreign Institutional Investors (FIIs) to trade in primary and secondary capital markets in the country. Also, FIIs with net worth of around $50 million can directly register themselves with SEBI. A foreign investor can access Indian stock markets through American Depositary Receipts (ADRs) or Global Depositary Receipts (GDRs). While GDRs are listed in the London Stock Exchange, ADRs are listed in NASDAQ and New York Stock Exchange (NYSE). Other popular choices of foreign investors include Exchange Traded Funds (ETFs), Exchange-Traded Notes (ETNs) and India-focused mutual funds. Thus, foreign investors start trading well after completion of a day’s trading session in India, impacting stock markets. 

Currency movements: Changes in currency movement overnight also impacts the stock markets in the country. For instance, any weakening or strengthening of the United States Dollar (USD) has a corresponding impact on the India Rupee (INR) exchange rate. As most of India’s foreign trade and foreign debt is denominated in USD, changes in the country’s macro-economic indicators will have a bearing on the INR’s exchange rate. These currency fluctuations significantly affect stock markets. As an investor you must know that key variables, like inflation rates, interest rates, country’s balance of payments, terms of trade, political stability, recession and speculation impact the currency exchange rate. 

Central bank and government announcements: The union government and RBI can make certain decisions and announcements in the post-market hours, which can have a direct impact on the stock markets. For instance, if the union government announces a fresh coal auction, then the stocks of energy companies can see an upswing. 

Conclusion: Thus, the above-mentioned factors can impact stock markets overnight. As an investor, you should remember that investments and securities markets are subject to market risks. So read all terms and conditions carefully before starting your investment journey. Happy 7th day of Navratri to all investors and traders reading this! Let’s not forget to celebrate the colours of Navratri with the market. Angel One wishes everyone happy Navratri, and may the goddess bless you!

Stock pick: Persistent Systems (Target INR 1,531)

Persistent Systems is one of the leading service providers to independent service vendors (ISV). The company has a very strong presence in Hi tech, manufacturing and life science segments which were amongst the least impacted sectors due to Covid-19. The Company has posted a very strong set of numbers for Q1FY21 with dollar revenue growth of 3.1% qoq along with improvement in margins due to tight cost control. Persistent has won a large deal during the quarter which will ramp up over the next few quarters. We expect the company to post revenue/EBITDA/PAT growth of 11.6%/21.4%/19.7% between FY20-FY22 given negligible impact of Covid-19 on FY21 numbers, strong deal wins, ramp up of existing projects along with margin expansion.