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what is pre market in share market in India

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The pre-market refers to the period before the official opening of the stock exchange (9:15 AM IST) when investors can place buy and sell orders for stocks. However, these orders are not executed immediately; they are collected in an electronic queue and are matched when the market opens.

Key Details of the Pre-Market Session in India

1. Timing

The pre-market session in India is divided into three parts:

  • Opening Session (8:45 AM – 9:00 AM):
    • Orders can be placed, modified, and cancelled.
    • No trades are executed in this period.
  • Pre-Open Order Matching Session (9:00 AM – 9:08 AM):
    • This is the most critical 8 minutes.
    • Orders placed earlier are matched and executed to determine the Opening Price for the day.
    • During this time, you cannot place new orders, modify, or cancel existing ones.
  • Buffer Period (9:08 AM – 9:15 AM):
    • A transition period to prepare for the normal market open at 9:15 AM.
    • No orders are matched or executed.

2. The Goal: Determining the Opening Price

The primary purpose of the pre-market session is to find a fair equilibrium price for a stock at the start of the day. This price is calculated based on all the buy and sell orders accumulated during the pre-market period.

This helps avoid wild and volatile swings the moment the market opens.

3. Who Can Participate?

  • All investors with a trading account—retail investors, institutions, etc.—can place orders.
  • The orders are placed through your regular trading platform (provided by your broker), just like during normal market hours.

4. Types of Orders Allowed

Generally, only Limit Orders are allowed in the pre-market session. This means you must specify the maximum price you are willing to pay (for a buy) or the minimum price you are willing to accept (for a sell). Market orders are typically not allowed.

Why is the Pre-Market Session Important?

It acts as an early indicator of market sentiment for the day. By observing the pre-market activity, you can gauge:

  1. Gap-Ups and Gap-Downs:
    • Gap-Up: If the matched opening price is significantly higher than the previous day’s closing price. This indicates bullish sentiment.
    • Gap-Down: If the matched opening price is significantly lower than the previous day’s closing price. This indicates bearish sentiment.
  2. Reaction to News and Events: The pre-market session reflects the market’s immediate reaction to:
    • Company-specific news (e.g., quarterly results, a new CEO appointment, a major deal).
    • Global events (e.g., US market performance overnight, movement in Asian markets).
    • Macroeconomic data (e.g., GDP numbers, inflation data released before market hours).

Best Books for Knowledge of the Share Market

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Here are some of the best books for gaining knowledge about the share market, categorized by focus area and skill level:

For Beginners

  1. “The Intelligent Investor” by Benjamin Graham
    • Considered the bible of value investing, this book teaches long-term strategies and the concept of “margin of safety.” Warren Buffett credits it as foundational to his success.
    • Best for: Fundamental analysis and conservative investing.
  2. “A Beginner’s Guide to the Stock Market” by Matthew R. Kratter
    • Covers basics like opening a brokerage account, buying your first stock, and avoiding common mistakes.
    • Best for: Absolute beginners.
  3. “The Little Book of Common Sense Investing” by John C. Bogle
    • Advocates for low-cost index fund investing and explains why most active traders fail to beat the market.
  4. “The Psychology of Money” by Morgan Housel
    • Explores behavioral finance through 19 short stories, emphasizing how emotions influence financial decisions.

For Intermediate/Advanced Traders

5. “One Up on Wall Street” by Peter Lynch

Teaches how to identify winning stocks (“tenbaggers”) by observing everyday products and services.

6. “Technical Analysis of the Financial Markets” by John Murphy

  • A comprehensive guide to chart patterns, trends, and technical indicators.

7. “Market Wizards” by Jack D. Schwager

“Market Wizards” by Jack D. Schwager

Interviews with top traders like Paul Tudor Jones, revealing their strategies and mindsets.

8. “The Black Swan” by Nassim Taleb

  • Discusses unpredictable market events and risk management.

For Specific Strategies

  1. “How to Make Money in Stocks” by William O’Neil
    • Introduces the CAN SLIM system for growth investing.
  2. “Reminiscences of a Stock Operator” by Edwin Lefèvr
    • A fictionalized account of Jesse Livermore’s trading career, offering timeless lessons on speculation.

Additional Recommendations

For Indian Markets: “Stocks to Riches” by Parag Parikh or “Coffee Can Investing” by Saurabh Mukherjea.

  • For Technical Analysis: “Japanese Candlestick Charting Techniques” by Steve Nison 6.