In India, there are two primary stock markets—BSE (formerly Bombay Stock Exchange) and National Stock Exchange of India (NSE). Both these markets operate from 9 AM to 3:45 PM.
While regular trading happens during these hours, you Stop-loss orders are orders that come riderscan also trade after the markets shut through after-hours trading. You can place an order for buying, selling, delivering or receiving securities or commodities any time between 3.45 PM and 8:57 AM the next trading day. These orders are registered as AMOs or “After Market Orders”. These orders are pushed into the market as soon as they open on the next trading day.
But why should you take part in after-hours trading, you may ask. Here’s an instance: You’ve had your eye on ten shares of Yes Bank that you wanted to purchase at Rs. X per share. However, on a particular day, when the prices are close to your expectations, you couldn’t find the time to purchase during the trading hours. Don’t worry. You can still buy the shares through after-hours trading. If you think that the shares are likely to open at similar rates the next day, place an AMO.
After-hours trading is also ideal for overseas Indian nationals who want to make investments back home. For example, if you live in the United States of America, you needn’t stay up late into your night and wait for the markets to open in India. Place an AMO, and you’re good to go.
What are after-hours trading timings?
The BSE and NSE shut shop at 3.45 PM. They reopen at 9 AM the next day. After-hours trading takes place in the period between when the market shuts down and then re-opens the next day. You have to careful while placing an AMO too close to opening time.
Here are the exact timings: If you want to trade in equity, the after-hours trading takes place from 3:45 PM to 8:59 AM for BSE. The same for NSE is from 3:45 PM to 8:57 AM.
To place an AMO for currency trading, you have to trade between 3:45 PM and 8:59 AM. For trading derivatives such as futures and options (also known as F&O), the after-hours trading takes place between 3:45 PM and 9:10 AM.
Why is after-hours trading important?
After-hours trading gives you the option of trading at attractive prices at your own pace. It helps you plan your investments well, too.
One of the reasons for you to invest in after-hours trading is that it gives you the time to analyse market trends. You see how the stock has behaved, look out for government announcements that can impact the stock or release of financial statements by a company. So, while it may seem like after-hours trading helps you catch up on market trends, it also enables you to plan.
After-hours trading may help you minimise losses if used wisely. If you foresee a change that could lead to a drop in prices in future, you can cut your losses by selling your stocks ahead of the slump.
At the same time, you should be careful of the negative repercussions of after-hours trading. When you sell stock during after-hours trading, you expect a specific price for it based on how the stock closed the previous day. This may not be true every time.
Also, if you place an AMO, you cannot place it with a stop-loss order to minimise your losses. Stop-loss orders are orders that come riders for selling stocks only if the prices reach a certain number.
How do I place an order for after-hours trading?
If you are our existing customer, log on to your Demat account after regular market hours. Place and order for buying or selling an equity derivative or commodity, just as you would for regular order. Click on the option for AMO. We will take your order and push it to the stock market as soon as the market opens the next day.
Extended trading hours- the India story
Globally extended trading hours are followed in influential exchanges, and so is the case with Indian markets. However, the markets operate on special pre-announced days during non-market hours and holidays.
The Indian regulator Securities and Exchange Board of India (SEBI) had initiated the facilitation of extended trading hours to bring the Indian market in line with the global ones. Brokerage firms were already operating in the commodity markets during those after-market hours, hence it is not much of a problem for them to start operating in the equity market during those hours.
However, there is still a consensus to be reached on the part of the exchanges. The individual exchanges need to send proposals to SEBI outlining various risk mitigation measures and many practical aspects related to regulating the extended trading hours system. For example, what would be the cost-benefit analysis of such a move? Would the income also increase as a consequence of increased timing? Is this a need for the market? Are we merely following global practices that may not benefit us? Would this also require an upgrade in the banking system of domestic banks? These are some of the issues that need clarification in the Indian context.
Benefits of extended trading hours
Faster Response: As we know, the markets are quite responsive to current news and events. These often determine the mood of the market and set the tone for things to come. Extended trading may give traders an advantage to react faster to the news and events than would be possible within restricted trading hours. Some companies release quarterly reports and earnings reports outside of trading hours. Traders would be able to react immediately to business news such as these. In a sense, it is like capitalising on the first-mover advantage.
Convenience: Several investors who are not full-time traders, miss out on investing in the stock markets because of its restricted hours to place and execute orders. Extended trading could provide added convenience to these part-time investors to set more trades and capture higher profits.
At par, globally: Such extension would help Indian markets be at par with their global counterparts. Indian markets are influenced by global markets, especially NASDAQ & DOW, and the reverse is also true. Given the interdependent relationship, traders would benefit from the extended trading hours that overlap with global stock exchanges. This measure would also draw larger investors who participate in global markets towards a synced Indian market.
Avoid Losses: Extended trading hours could also help trader plug losses by using this window to place necessary orders that can later help the trader exit a losing position when regular trading begins.
Capture Market: Despite the volatility, some traders may get shares at attractive prices. This trend is visible in the case of stocks that are impacted by news events. Traders can leverage the extended trading hours in such cases, instead of waiting for the next working day to take a position.
Things to remember about extended trading hours:
- Individual brokers may have their policies for after-hours trading, and it would be prudent for the investor to be aware of the same.
- Currently, the volume of shares traded in the extended trading hours and the number of traders who trade during this time is less. Hence, one could expect more volatility due to the lower trading activity.
- The opening price of a share in the stock market may not necessarily be the same as its closing price in the after-hours market. Moreover, the share prices of a specific stock during the extended trading hour may not reflect that same stock price in the regular market hours.
- Individual buyers would be more likely to deal with institutional buyers, which puts the former at a disadvantage. Institutional buyers would have a competitive advantage, such as access to more current information, as well as more capital and resources.
- If the market reacts to unfounded news or rumours, it will negate the first-mover advantage. Additionally, significant news events and stories would also lead to fluctuations in the share prices. In short, the environment would be more prone to more significant price fluctuations.
While there are several benefits to extended trading, investors must be cautious of the downsides and volatility that come with it to minimise risks and maximise returns.
It remains to be seen how Indian exchanges align with the global markets by using extended trading hours. Indeed, this is something that will require traders to come out of their comfort zones. However, as the Indian economy moves ahead and gains momentum, it is best to have a level playing field with the world!
After-hours trading may come with risks, but trading is risky business anyway. If done well and wisely, you can reap the benefits of after-hours trading at your own pace. Use it as a tool to analyse market trends, take a careful decision.