Market direction presents an opportunity. If the markets are expected to go up, the prices of individual stocks are also likely to go up.
Traders with a shorter time horizon can use the data to decide whether to purchase or sell, or to even get in the trading session better prepared to face what’s coming.
Predicting the markets isn't as difficult as you’d think. If you look at just these 3 things, you should be able to improve your forecasting game.
1. The SGX Nifty 🔍
The SGX Nifty is a stock index futures contract traded on the Singapore Exchange based on the Nifty 50 Index. It’s the same thing as Nifty 50 futures, but just on a different exchange.
The SGX Nifty Futures trade for 16 hours from 6.30 AM to 11.30 PM (IST) while Nifty trades for 6.5 hours on NSE from 9:00 AM to 3:30 PM (IST).
But since the Singapore markets start early (because of the time difference), price discovery on the Nifty 50 starts earlier in Singapore, and you can take advantage of that.
This makes it possible to easily predict the opening of the actual Nifty and the Indian markets, by simply observing what’s happening on SGX Nifty.
Foreign investors and speculators often set the pace for the Indian markets by following the example of the SGX. Since the SGX offers after-market trades around the clock, investors take positions 24 hours a day.
2. Global Markets Take the Lead 🌎
The stock market in India is fairly sensitive to developments throughout the world. Data from the European and American markets can help Indian investors anticipate how their markets will react when they open.
European and American exchanges close substantially later (at 9 PM and 1:30 AM IST) than their Indian counterparts due to the timezone difference.
This means you can get a sense of how the market is reacting to news that hits after it has already happened, such as a rate hike or a new economic report. Indicators can also be found in Indian stocks that trade on these international markets.
Since global markets are becoming increasingly intertwined, investors can anticipate the day's opening performance of the Nifty and Sensex by checking out how other global indices like the Hang Seng and Nikkei have opened.
3. Look Ahead 👓
Having a firm grasp of recent events, especially those that occur after the market closes, is a huge advantage. This implies you should be wary of any news pertaining to the market after 3:30 PM when the exchanges usually close.
Hypothetically, the Reserve Bank of India might declare a less aggressive rate increase than was anticipated following a policy meeting. Knowing this information can make predicting the next day's market opening higher rather simple (as usually lower interest rates mean higher valuations for stocks).
A helpful list of events to look out for are:
Annual General Meetings
Corporate earnings announcements
Budget by the Ministry of Finance
Change in interest rates (Repo, Reverse Repo)
Key economic data releases
Inflation (CPI, WPI)
Index of Industrial Production (IIP)
Purchasing Managers Index (PMI)
Accurately predicting the stock market’s opening moves can be a useful tool. If your projection is accurate, you have an opportunity to profit.
It can also help short-term traders build the right mindset and go in prepared, then taking the time to learn and adjust while the markets are open.
Ideally, you would utilise these indications to anticipate market behaviour and then invest to capitalise on that prediction. Of course, the first step is to correctly gauge the market direction.
As with all investment strategies, you should conduct a thorough analysis while understanding your strategy and its implications before you place a bet on the direction of the open.