KOLKATA: Ten years is a fairly long slice of time to continue with some set patterns. In November 1994, the National Stock Exchange (NSE) had gone live with its capital market trading, the Bombay Stock Exchange (BSE) became fully automated in 1996-97, and from November 18, 1998, official trading hours are changed from 9.55 am to 3.30 pm.

That, too, is likely to change very soon. NSE has sought permission from Sebi to advance official trading hours for its prize index derivative, the S&P CNX Nifty. Currently, trading in both the derivative and equity segments, start at 9.55 am. Though, no confirmation of the revised time is available, but indications are that trading in the CNX Nifty index futures can start off around 8 am. If so, this will be a historic move for NSE and the capital market in general.

An earlier start of trading in the CNX Nifty futures will bring the country’s market timings closer to those of other globally-connected bourses further east of India. The move will essentially help Indian marketmen with an earlier price disovery mechanism, to which they were being consistently beaten so long.

Key to the timing issue and the CNX Nifty is Singapore Stock Exchange (SGX), where it is traded as “SGX CNX Nifty Index Futures”. During Monday to Friday, SGX trading hours are 9 am to 12.30 pm and 2 pm to 5 pm. In Indian standard time (IST), this converts to 6.30-10 am and 11.30 am to 2.30 pm. Mumbai is 2.5 hours behind the Singapore timing.

In addition to regular trading hours, SGX also has a pre-open routine session between Singapore time 8.30-9 am (IST 6-6.30 am) and a 6-minute pre-close routine session from Singapore time 5-5.06 pm (IST 2.30-2.36 pm).

For all practical purposes, therefore, Singapore begins the Nifty trading, approximately 3.5 hours before the Indian markets open. It was being observed, said NSE circles, that “very often in the past two years, the Indian market would open under psychological pressure relative to the price created at Singapore of the SGX Nifty.

That trend would rule the Indian market for the day, not only in terms of the domestic Nifty futures, but for all constituent securities that make up the Nifty as well. As a result, physical prices of Nifty stocks in India would tend to rise or fall on a particular day depending on the early morning price created at Singapore”.

The CNX Nifty, which is compiled by the Indian Index Services & Products (IISL) is an extremely popular derivative on the SGX. Its website pays glowing tributes to it by saying that it is a “well diversified market capitalisation weighted index comprising 50 large and highly liquid securities traded on the NSE”. “The Nifty Index” it says “covers about 23 sectors of the economy and approximately 60% of the total market capitalisation of the underlying Indian bourse”.

With India having one of the most sought-after foreign portfolio investment destinations in the world, foreign investors interest in the SGX Nifty at Singapore is only understandable. “In these global connect days, FIIs across the Atlantic find it much easier to tap Tokyo and Singapore before Mumbai markets open. It was becoming an international time-difference issue and the Indian markets were suffering a bit due to the inflexibility of trading hours” said an NSE source.
“It had, therefore, become a usual practice for domestic players to watch movement of international markets, New York at night and Singapore in
the early morning. The SGX CNX Nifty price was key to knowing the FII’s interest on a day before domestic market hours. Very often, the Nifty stocks on the domestic market would get set according to that feel and there was little that the regulator or anybody could do, as the market zoomed or came hurtling down, depending on how the sentiment was,” he added.

An earlier price discovery system in India, hence, became crucial. An earlier start to the trading of the CNX Nifty futures on the domestic market might pave the way for advancing general timings as well for equities and derivatives in the months to come.

Indian bourses had gone through several changes in timings in the past. MR Mayya, former executive director of BSE and a market maven said: “Till 1970, Indian market timings were from 12 noon to 2.30 pm. However, in 1970 itself, the hours got reduced to 12-2 pm. This continued till 1988-89, when the government wanted to increase trading hours and so it became 12-2.30 pm once again.

In 1990-91, the timings were further extended to 12-3 pm, but, in 6 months time, it had to be reduced again to 12-2 pm as volumes went up so high that it was getting impossible to complete al the paperwork. In 1994 NSE opened and later BSE switched over to complete automation, the 9.55 am -3.30 pm timing was standardised and turned into a unform practice across India.”

source: Economictimes

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