The stock market regulator SEBI too seems to have fallen for the hype of an event known simply as, Budget. Worse still, the market regulator chief himself seems to have backtracked from his earlier held view of ‘no correlation between markets and budget stand’ Not surprising then that exchanges seem to have received just a one liner from the market regulator asking them to keep exchanges open next Saturday on which Budget falls.
What should have been a drab affair whereby the government projects its annual revenue and expenditure heads has now become an annual media circus. Speculation wrt budget contents start doing the rounds a good 1 month before the actual event. Newspapers, business news channels are full of budget related crap. With such massive expectations its not surprising market volatility is high on Budget days as typically speculators amass positions in the derivatives markets only to unwind it post the event. This unwanted volatility could have been curbed by keeping the market shut on Saturday as speculators would shied away from excessive risk taking as they would have to react only on Monday. But by keeping markets open on that day these speculators need not fear. And anyway, the fine print analysis of the budget takes time. Market reaction on Monday would have been balanced as one event doesn’t change the future of the company underlying a stock.
Brokers argued that since Singapore opens earlier than Mumbai for trading, FII business would migrate to Singapore and they would lose out. Exchanges concurred since the war between NSE and SGX for market share is quite well known. Brokers (more brokerage), exchanges (more revenues as it is linked to turnover and turnover is typically high on such days), news channels (more eyeballs) and stock market speculators (rampant speculation) would be thrilled by this move. Retail investors should keep out and chill as the chance of losing money would go up manifold. Genuine long term institutional investors wouldn’t bother anyway since they don’t change their view on the basis of a singular event.
Lobby groups seem to have prevailed. The argument extended by brokers could very well be extended to market timings too as a whole host of events keep on happening the world over while the markets are closed. Thus, the next demand of these elements would be to extend market timings. All this talk of long term investing seems a joke when so much emphasis is given to the short term and when the regulator itself doesn’t understand what long term investing is.