Should Stock Market Be Open When FM Arun Jaitley Unveils Budget?

Should Stock Market Be Open When FM Arun Jaitley Unveils Budget

The Budget 2015 is approaching near, and with it the debate on what are going to be the key announcements is heating up. Some are expecting more spending cuts, while some are expecting changes in divestment target. However, we will not debate on the reforms that can be revealed in the budget. Instead, we are going to discuss on the topic Should Stock Market Be Open When FM Arun Jaitley Unveils Budget? As of now, the markets are expected to remain close on February 28, 2015.

Yes

- If the markets remain closed, the traders will restrain themselves from taking up big trading positions in the run up to the Budget.

- The risk-reward ratio will not remain favorable for the traders. They won’t be able to exit swiftly from trading positions in event of any announcement adverse to their expectations.

- It is for the first time in more than two decades, the markets will remain closed on the Budget Day. There is no rationale to change the trend.

- In the past, there are three instances when the Budget was unveiled on Saturday, and markets have remained open. Why not this time? The three occasions are Budget 1992 presented on February 29, Budget 1993, presented on February 27, and Yashwant Sinha’s budget on February 27, 1999.

- Markets have been experiencing a bullish sentiment after BJP made government. It has attracted strong FII flows, and therefore, it is better markets should remain open this time also,

- The traded turnover is almost 20-25% higher than the daily average on Budget day. Closing of markets will result in a loss of revenue for the stock exchanges who charge a fee based on the turnover.

No

- By Monday morning, the stock market would digest all the key announcements in the Budget 2015, and that will be seen in the opening prices.

- Budget 2015 is on Saturday, and normally markets remain close on Saturday. Just because budget day results in volatility in stock market, the exchanges cannot remain open on Saturday.

- There is no relation between the stock markets and budget being open. They function in its own way and has own momentum. It should be treated like any other normal event.

- If markets can remain open on Saturday when there is budget, why can’t they remain open on other events that results in volatility.

- The fund managers will benefit if markets remain close on the Budget day. They will be spared of the big swings that result from knee-jerk reactions to budget announcements.

Conclusion

There is no previous instance of the markets remaining close on the day the Union Budget is unveiled. If this time market remains closed, it will be a new trend that will reflect that government doesn’t want to be held captive to its whims on key policy matters. However, a better approach will be to follow the tradition as budget is an important event and the exchanges can react to the measures proposed immediately.