NSE mulls extending equity segment trading hours; Will investors benefit?

The National Stock Exchange (NSE), India’s largest stock exchange is looking to extend the trading hours for the equity segment. As per media reports, the MD & CEO of the bourse, Ashishkumar Chauhan, said that the exchange was working with its members and taking their feedback on the extension of trading hours.

Although the Securities and Exchange Board of India (SEBI) allowed the stock exchanges to extend trading hours back in 2009, no move towards implementing it has been made. There were some discussions in the past about the extension of trading hours, but they did not result in anything material. In 2018, SEBI also allowed stock exchanges to increase the trading hours for equity derivative contracts till 11:55 PM (from 9:15 AM to 11:55 PM).

Currently, the trading hours for the cash and derivative segments on the two major exchanges in India are from 9:15 AM to 3:30 PM. Recently, NSE has taken up discussions to extend the trading hours by 1 hour 30 minutes, to 5 PM.

Reasons for extending trading hours

One of the primary reasons for extending trading hours is to offer investors the advantage of information flow and reduce risks. In a period of globalization, markets all around the world are connected to each other. Major events in other economies can have an impact on the Indian economy and can leave an impact on the domestic stock market as well. By extending the trading hours, Indian investors reduce the risk of overnight positions. Moreover, investors in markets with extended trading hours can hedge their risk in a more effective way.

Another reason for extending trading hours is to increase the trading volume with the NSE. The SGX Nifty, a derivative of Nifty, is traded on the Singapore stock exchange and draws in a lot of volumes for foreign institutional investors (FIIs) as it begins trading earlier. Extended trading hours can help the NSE keep higher trade volumes on the exchange.

How does this affect retail Investors?

One of the major benefits of extended trading hours is that Indian traders will be able to manage risk better. Taking advantage of global news and information, traders can hedge and reduce their overnight risk.

Extended trading hours will also increase the trading volume and attract more market participants like FIIs and mutual funds. However, the increased volume will not significantly impact the stock prices. Longer trading hours will also help in reducing the volatility in the markets.