The stock market is an unpredictable space, and investors must stay up-to-date with market activities. Although it operates every day except weekends and public holidays, market holidays have their own significance. National Stock Exchange of India (NSE) holidays are days on which trading is not conducted on the stock exchange. These holidays occur for various reasons, but they play a crucial role in determining trading volumes and investor behavior. In this blog post, we’ll explore the significance of NSE holidays, how they impact trading, and the investment strategies suited for these holidays.
The Significance of stock market holidays
Some investors believe that stock market holidays are mere breaks from the routine. But, holidays are significant for several reasons. Firstly, holidays give traders time to absorb and analyze market events. Market volatility during holidays can be intense, and holidays provide a good opportunity to reflect on how events affect investments. Secondly, holidays provide a window of time to reset and adjust positions. Some investors tend to reposition their stock portfolios before or after a holiday to maximize returns. In fact, some market experts believe that the market is primed for new trends and directions following a break.
The market’s reaction to holidays.
Despite the numerous benefits of holidays, market volatility is often amplified during these periods. Typically, during holidays, the number of participants tends to be low, leading to lower trading volumes. Low trading volumes may contribute to higher bid-ask spreads, leading to trading inefficiencies, and, as a result, more volatility. Additionally, the market can be volatile when it opens, mainly if there has been significant news or an unexpected event during the break. For example, suppose major economic data is released during a holiday. In that case, the market will react strongly to the data when it reopens since market participants will have had plenty of time to incorporate its significance.