'Pre-market session will end volatile opening'

A half-an-hour, pre-market session ahead of the stock market opening for trade will eliminate extreme volatility on stock markets immediately after bourses open, according to Dina A Mehta, managing director, Asit C Mehta.

The pre-market session, which will allow investors to monitor 'buy' and 'sell' rates on various stocks ahead of the market opening, would also eliminate the chances of markets hitting the downward circuit (the maximum permissible fall) within minutes of the market opening, Mehta, who has served in several positions, including in the Code of Ethics Committee of the Securities and Exchange Board of India (Sebi), said.

Indian markets have hit the downward circuit on thin turnover in late-October (when Sebi imposed curbs on participatory note investments by foreign institutional investors) and in late-January.

"A pre-opening session will help investors in getting a feel of what's happening in the markets. The quotes will be displayed on screens and this will help investors to take a decision whether to buy or sell when markets open officially," she said. "Investors will get to know the mood of the market in advance," she added.

Stock market trading was closed for one hour after benchmark stock indices hit the downward circuit immediately on opening on January 22, prompting calls for pre-open trading sessions on Indian markets as well. Other developed markets, including Hong Kong and Toronto exchanges, have pre-opening sessions.

"The pre-opening session determines a fair opening price and reduces the loading of the system from a large number of order inputs and trade execution messages at the commencement of the morning session," said a note on pre-opening on the Hong Kong stock exchange website.

Mehta, who was the first woman to get elected on the board of the BSE in 1999-2000, also called for reforms in other aspects such as introduction of delivery-based settlement in the futures and options segment.

With Sebi announcing the date for short-selling and securities lending and borrowing system, she felt it was the right time to introduce delivery-based settlement in the derivatives segment.