The Coronavirus outbreak has created a tremendous amount of volatility in the stock markets across the globe. Domestic markets have witnessed an extended dose of volatility in the last week and are expected to witness heightened bouts of it in days to come, for the next two weeks trading sessions are going to be shortened due to back to back trading holidays.
Last week, Indian stock market was closed for trading on April 2, on account of Ramnavami. It was closed for trading on Monday, April 6, on account of Mahavir Jayanti. It is going to be closed for trading further on April 10, on account of Good Friday. Further, on April 14, Tuesday, Indian markets will be closed for trading on account of Ambedkar Jayanti. The trading holidays are so close to each other that the trading week beginning April 7, Tuesday will be of only three sessions, which will end on April 9, which coincides with the settlement of the weekly F&O cycle.
Back to back trading holidays are not in the interest of the traders in the market in current turbulent time as due to market closure, they lose on the opportunity of taking advantage of what is happening in the international markets on the days when the domestic markets are closed for trading. In addition, they get beaten twice when volatility in the international market has its impact on the domestic market when it opens for trading on the next day.
Take for an example, Nifty and Sensex closed with a loss of 170 points (down 2.06 per cent) and
674 points (2.39 per cent) on Friday last to close at 8,084 points and 27,591 points when markets closed for trading on Friday. Indian markets were closed for trading on Monday as mentioned earlier. However, SGX Nifty, all other Asian market and European markets were open for trading and ended with sizeable gains at the close. However, Indian markets missed the bus to take advantage of positive sentiment.
Vinod Nair, head of Research, Geojit Financial Services said, “Trading holidays in times of current uncertainty created by COVID-19 are going to add fuel to the fire of volatility, impacting the market volume and turnover. With the markets plunging over 30 per cent in last one and a half months, investors too have reduced their exposure to the market that has also taken its toll on market turnover.”
In addition to this, the margining requirement has been tightened by the regulator Securities and Exchange Board of India (Sebi), as its risk containment measures to keep control market volatility. Sebi has asked market participants to reduce the exposure to brokers both in cash as well as derivatives segment.
As a result, the cash market turnover of NSE, which averaged at Rs 45,000 crore has come down to Rs 35,000 crore in April.