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Union Budget 2015: Should stock exchanges be open when Jaitley unveils Budget?

Santosh Nair

All indications so far are the stock market may be closed for trading on February 28, when the Union Budget is announced. That’s bad news for traders, who thrive on the volatility on Budget Day. This could even deter traders from taking up big positions in the run up to the Budget, since they will not be unable to exit swiftly in case of any announcement adverse to their view.

By Monday morning, the market would have had enough time to digest all the announcements in the Budget, and that will be reflected in the opening prices. And for traders who are on the wrong side of the market, the losses could be steep.

To an extent, the market being closed on February 28 is not so good news for the stock exchanges either, since traded turnover is at least 20-25 percent higher than the daily average on the day of the Budget. Since the stock exchanges charge a fee based on the turnover, they will have to forgo some revenue. A few market players have countered this view by saying that the Budget session is not like an airline seat or a hotel bed, and the stock exchanges can make up for it on Monday. Fair point. But then, rarely has the stock market been closed for trading on Budget Day.

In fact, when the timing of the Budget Speech was changed to 11 am for the first time, it was a Saturday and the market was open for trading. Incidentally, it was the BJP-led NDA government in power at that time.

Even before that, when the Budget Speech used to begin at 5 pm, the stock exchanges would have a special 2-hour session post the Speech for the market to react to the announcements.

Investors who claim to have a long term approach to the stock market have nothing to complain about the market not being open on Budget Day. In fact, all the more better for fund managers who are spared of the wild swings resulting from knee-jerk reactions to Budget proposals. At times, fund managers are forced to respond to minimise the impact on their net asset values.

Sebi chief UK Sinha’s innocuous remark three weeks back that “the timing of the Budget is the prerogative of the government; the market functions according to its own calendar” says a lot.

Market observers say it could possibly reflect the Finance Ministry’s thinking that there is no need for a special trading session on Saturday.

The regulator could still approve a special trading session if the stock exchanges make a case for it. Interestingly, the stock exchanges have not made a pitch for it so far.

If the market remains closed on February 28, it will mark a departure from tradition. More importantly, it could be the government’s way of telling the stock market that it does not want to be held hostage to its whims on policy matters.


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