A trading day does not always begin with the opening bell. News out of U.S., oil prices, economic data can influence the views of investors before Indian exchanges open their doors for the day. Some of these effects may have already been factored in by the time markets open.
That is why, apart from a market index, traders follow overnight guidance, domestic market dailies and sector movements to get an idea of what to expect at the opening. There is no crystal ball but a combination of these factors can guide you better than a market index.
What Can You Learn Before the Market Opens?
GIFT Nifty is one of the indicators traders watch before the Indian market opens. This is a future contract, which is traded on BSE’s International Exchange in Gujarat International Financial Technology Centre (GIFT City), and is a contract with an underlying Nifty 50 index. This has a longer trading window that captures global market movements outside normal Indian market hours.
In the case of the US markets, for instance, any positive movement in the overnight session can boost the expectations of Indian markets. If the world markets drop, it might have the opposite effect. This Gift nifty price can assist traders to realize these early signs and prepare for the approaching session.
While it provides a good barometer, the opening values may still change, influenced by new developments in the global markets. Asian markets, crude oil prices, currency movements and announcements on economic data should also be assessed by traders before taking a call.
Why the First Few Minutes Matter
There’s usually a flurry of orders in the opening minutes. Some investors act on overnight news, while others wait for prices to settle before making a decision. This can lead to sudden moves in either direction.
A good opening is no guarantee of a bullish day as investors may lose interest leading to a reversal. The opposite is also true wherein bearish openings are reversed during the day.
The BSE Sensex reflects the movement of 30 large-cap companies which are listed on the Bombay Stock Exchange (BSE). As the companies hail from different sectors, it offers a good indication of overall market health without getting skewed by the performance of one particular sector. The index is based on the free float market capitalisation of the 30 stocks on the exchange.
What the Sensex Tells You During the Day
The BSE Sensex tracks 30 major companies listed on the Bombay Stock Exchange. These businesses come from different parts of the economy, so the index offers a broad view of market performance. Its value is based on the free float market capitalisation of its constituent companies.
Checking the Sensex share price during the session helps investors see how sentiment is changing. Yet the index level alone does not explain why the market has moved. The banking index may rise while the technology stocks decline for instance, creating a mixed bag scenario.
It is worthwhile looking at individual stock and sectoral moves to understand market movements. If many stocks rise together, it signals a broad-based market uptick but if few large-cap stocks rise steeply to pull the market index higher, it may not reflect overall market movement.
Do Not Ignore the Closing Session
The market closing at a higher level for the day is a good indication of buyers overpowering sellers for the day. A market that remains range bound during the day will have a higher closing price if buyers continue to dominate towards the end of the day.
But it is important to consider a single day’s performance in the context of the whole day. It has to be compared to previous trading days, volumes in trades executed, news out of companies and overall economic movements in the country.
Put the Signals Together
While GIFT Nifty can give indication of the market mood ahead of the opening of Indian markets, the Sensex reflects the movement of shares during local trading window. However, both can be a good starting point to understand market movements as long as investors do not expect either to have a predictive capability on its own.
Assess the opening trends, individual stock movements as well as the closing trends for an overall assessment without getting spooked by day-to-day market movements.
