There is a lot of volatility surrounding the open of the equity markets in any country or any exchange. It is often said that amateurs open the markets while professionals close it. The reason behind this saying is the nature of the order flow that comes into the exchanges and who is behind those orders at certain times of the day.
As a former trader for a brokerage, I saw this phenomenon firsthand. In the evening, the retail traders and investors would return home from work and see what the markets had done for the day. They would also absorb the news or tips from the television or newspapers and realize that they just had to buy the hottest stock first thing in the morning! When I would arrive in the morning to the broker’s office, I would be met with a large stack of orders from our retail customers. This was duplicated in brokers’ offices all across the world.
The Indian exchanges have recognized the volatility that this influx of order flow can create and have taken steps to reduce the dangers associated with the opening of the equity markets…. Continue Reading
