The bonus issue of GAIL India – a big name in the industry committed to reducing carbon emissions and enforcing renewable projects – was in the news. The company proceeded with bonus shares in the ratio of 1:2.
Airtel equity (1.9%) changed hands through multiple block deals.
Oil prices declined as the demand slumped in China, the top crude importer. The interest rate may also be hiked further to curb inflation.
Above news were made headlines in the 1st week of September 2022. Such news at the national and international levels impacts the stock market noticeably. Therefore, stock market participants need pre-market preparation. They need to consider various aspects to make investing or trading decisions before the market opens. Positive news usually drives participants to buy stocks, like good earnings reports of companies, a new product launch, a corporate acquisition, and sound economic indicators leading to a rise in stock prices. When you are opening your Demat account with a stockbroker, look at the reports it offers. It can be a great source for gathering data on the stock market.
Here are the five important aspects to consider before the market opens up and act accordingly.
Important Aspects Traders Consider Before the Market Opens
Sort Premarket Securities and Identify Pre-Market Levels
Stock traders consider sorting premarket securities by volume. It helps them to know where most traders are actively taking positions. Then you can look at price change and the market trends. Look at companies reporting earnings or commodities responding to geopolitical affairs. Traders can identify premarket levels and note down the key levels. Check out where index futures are trading in the premarket. It can give crucial cues on the market sentiments and possible trends.
Review of Macro Forces
Macroeconomic factors that affect the Indian equity markets include Crude oil (inverse relationship with the Indian stock market as the Indian oil industry is a major importer of oil), the Dollar index, US 10-year yield that affects Fed interest rates, US market indices, and others. Negative information from the US markets largely impacts the Indian markets. Stock traders need to scan stories that impact the stock markets overnight. These can be organisation or market specific. Geopolitics issues affect the stock markets globally.
Filter the News Flood
While you scan for the available market information, you need to decide if it is important news that can result in significant stock price movement. Go through financial websites to know about all financial updates and filter out to see the trading opportunities.
Avoid Following Crowd
Traders need not follow the crowd. Different traders have varied trading strategies. You can make a list of momentums. For intraday trading, traders can choose stocks from the F&O list as stocks in the derivative segments tend to be more liquid and volatile. The possibility of being in momentum is high. Follow your trading plan to meet your specific financial goals. However, you should not go to the opposite side or try to time the market as it can lead to huge losses.
Find Safe Exits in the Pre-market
Traders can find the opportunity in the premarket to exit unfavourable positions. Exchanges often generate fair exits before the opening bells. If you expect to take a hit after the opening bells, you should first exit from losing positions. You can decide on an aggressive or defensive trading strategy based on your pre-market analysis in the opening trading session.
Anticipating the News
When negative news can be good news:
News that impacts some stocks negatively is good news for another. For instance, news of a hurricane. It may cause a decrease in utility stocks, and insurance stocks will take a hit depending on the storm’s severity. Meanwhile, the shares of home improvement merchants will grow with expected higher sales in the coming period.
Several Sources of Information:
The possibilities for trades going right/wrong are infinite. Numerous events simply cannot be anticipated, like a crisis that pushes oil prices. Traders need to keep learning during their trading journey. Many traders spend considerable time anticipating the next news cycle hoping to invest or sell stocks before the actual numbers are released. They use several sources that they consider in this effort:
- Economic reports that governments issue:
It can be an employment report that indicates the economic strength, a report on durable goods to know the confidence and spending strength of the retailers ahead.
- Company and industry issues:
One of the oldest sources of information is quarterly reports. Traders know about products and industries that are getting demanded following the trends.
Stock market participation requires a realignment of strategies to grab short-term opportunities. Gather data and decide how those overnight events will impact trade flow to ensure success in your trades.
Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.
Smriti Jain is the owner and senior content publisher at Financesmarti. Financesmarti is a website where she shares a lot of useful stuff for the people and business of India. This includes small business ideas and other banking information, as well. Smriti completed her education in science & technology from Delhi University. Smriti usually has interests in digital marketing now, and she has chosen this career for the full-time opportunity. The primary purpose of starting this blog to provide quality information on the banking industry to the people.