It has been observed in the past that our major stock indices like Sensex, Nifty, BSE100 etc. follows the other Asian stock markets like China's - Shanghai, Japan's - Nikkei and Hong Kong's - Hang Sung. The prime reasons of this are as follows:
1. Open early than Indian markets.
i) In Japan, Nikkei opens for 9.00AM - 11.00AM and then reopens for 12.30AM - 3.00PM. This according to Indian time brings to 5.30AM - 7.30AM and then re-opens for 9.00AM-11.30AM.
ii) In China, Shanghai opens for 9.15AM-9.25AM(Centralized Competitive Pricing) then re-opens for consecutive bidding at 9.30AM, till 11.30AM and afternoon session begins at 1.00PM which lasts till 3.00PM. This says that their market opens, when Indian clocks strikes 6.45AM.
These time facts clearly show that in respect to our market open timings i.e. 9.55AM, their markets open 3-4 hours before it. Great Investors and Innovators never sleep. They always keep finding how money and idea can be generated. Also, money never sit idle. So big investors like FII, Banks, Insurance companies etc., when start investing, everyone eyes on them. They keep on investing 24 hours in various world markets all time.
2. They reflect investor's mood.
If all Asian markets rises, chances are good for Indian stock markets too. If other Asian markets open in a positive mood, then a sure inflow of money is considered in Indian markets too. and vice-versa has also been observed in the past too.
The reason is pockets of big investors, if they are over-flowing with money or has some spare money, they like to put it into diversified way, i.e. in different markets and bank schemes. So, if they have invested in their markets, chances are good for our Indian stock markets too.
Historic Examples:
June 15,1998 - BSE falls 194 points and HangSung fell by 5.7%, Thai stocks by 5.3% and Korean stocks by 4.8%, touching to 11 year's low.
October 09, 2006 - When North Korea conducted nuclear tests, their index fell by 2.4% and same impact was seen on other asian markets, including Sensex which observed a fluctuation of 168 points.
*Note: There is a graph in the right sidebar with title "BSE vs world markets", it clearly shows that almost all world markets continue to react in same manner, following same sentiments unless there is some big news in their respective countries.
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