What is Pre-Open Market Session in the Stock Market?: If you ask anyone at what time the stock market opens in India? Most of the time you will get an answer that the Indian stock market trading session opens at 9:15 am and close at 3:30 pm. 

But do you know?  Indian Markets have one earlier pre-open market session that opens only for 15 min before the actual trading session starts. This session from 9:00 a.m. to 9:15 a.m. helps to stable the unusual moments and volatility in the market because of major announcements. NSE and BSE both have the same timings for the pre-open market session.

 Now let’s find out more about this session.

What is Pre-Open Market Session?

The pre-open market session is helpful for the perfect opening price of a stock for the current trading session. 

The timings of the pre-open market session are from 9:00 a.m. to 9:15 p.m. which is 15 minutes before the trading session. As we discuss early the concept of a pre-open market is to stable the heavy volatility due to some major news or events that announce overnight when the trading session is closed.

How does a Pre-Open Session help to stable volatility in the share market?

The session helps to stable the prices of companies’ share by determining the actual demand and supply of the stocks while the process of identifying demand and supply take place the equilibrium price is decided, which helps to bring stability to the price.

Now let’s discuss how the pre-open session in the share market works.

Stock Market Timings in India: Understanding of the Pre-Open Market Session

The 15 minutes of the pre-open market session is divided into 3 sub-sessions.

1. Order Entry Session

 Time – 9:00 a.m. to 9:08 a.m. 

Activities done in this session are: 

  • Placing of order to buy and sell stocks.
  • Cancel or Modify orders

After 9:08 a.m. orders are not accepted. 

2. Order Matching Session

Time – 9:08 a.m. to 9:12 a.m. (4 minutes)

Activities done in this session are: 

  • Conformation of order and order matching
  • Calculation of the opening price of stocks for the normal session

In this session, no one can buy, sell, cancel, or modify orders.

3. Buffer Session

 Time – 9:12 a.m. to 9:15 a.m. (3 min)

Activities done in this session are: 

  • Buffer session
  • Facilitates the transition from pre-open to normal market session

This session is use as a buffer for any abnormalities in the previous two sub-sessions.

Know About: Indian Stock Market Timings – All Time in 1 Guide

How is the Stock Opening Pricing in the Pre-Open Market Session Achieved?

During the pre-open market session, a call auction takes all orders and comes at an equilibrium price.

Here equilibrium price = the price at which the maximum number of stocks can be traded which is based on the demand and supply quantity and the price.

The orders placed during this session are then matched with the equilibrium price and the trades take place at this price during the pre-market session. 

Now let’s understand with the example that how equilibrium price is determined in the pre-market session. 

Example 1

Assume the closing price of the ABC stock is 500 ₹.  The table below gives the price and quantity figures during the pre-open market session.

Stock priceOrder book Demand and Supply QuantityMaximum  traded quantityUnmatched orders 
BUYSELLDEMAND SUPPLY 
503110089035008508502650
5051520950115002200022000-10500
507200035008000105008000-2500
49740005500400082504000-4250
499320010500200003300010500-13000

Stock price ₹ 505 corresponds to the highest tradeable quantity of 22000 so it will be considered as the equilibrium price.

Example 2 

Let’s have a look at another possible example

Stock priceOrder book Demand and Supply QuantityMaximum  traded quantityUnmatched orders 
BUYSELLDEMAND SUPPLY 
503110089035008508502650
50515209501150022000105001000
507200035008000105008000-2500
49740005500400082504000-4250
499320010500200003300010500-13000

The above example shows that the maximum tradable quantity matches two stock prices which are ₹ 505 and ₹ 499. 

Here, the minimum unmatched order quantity corresponds to ₹ 505, so this price will be taken to be the equilibrium price. 

Example 3

In this example both maximum tradable quantity and unmatched orders are equal. 

Stock priceOrder book Demand and Supply QuantityMaximum  traded quantityUnmatched orders 
BUYSELLDEMAND SUPPLY 
503110089035008508502650
50515209501150022000105001000
507200035008000105008000-2500
49740005500400082504000-4250
4993200105001150033000105001000

Here, the stock price which is closer to the previous day’s closing price ( i.e. 500 ₹ ) will be considered the equilibrium price. 

So it will be 499 ₹ 

If the orders that have not been matched or traded in the pre-open market session is carried forward to the normal market timing and the opening price, then

  • If the opening price is not identified during the pre-open market session, the market orders will be shifted to a normal trading session at the previous day’s closing price. 
  • Limit orders not traded/matched during the pre-open session will be shifted to the normal trading session at an equal price.
  • Market orders that are not traded/matched during the pre-open session will be shifted to the normal trading session at the opening price of that stock.
  • Live Link: NSE Pre-Market Open

FAQ

Anybody can place an order in the pre-open market session.
You need to activate the pre-open market session feature for that you have to contact your broker.
During this session volatility in the market is too high which involves high risk. This session is helpful to stabilize the market so that traders can easily trade in a normal market. 
NSE and BSE have enabled NIFTY50 and SENSEX30 stocks for trading in this session. However, stocks that are not part of the NIFTY and SENSEX indexes still be part of this session. Only they are not available to trade during the pre-open market.
You can visit the NSE INDIA website to get the price of all stocks during the pre-open market.
Author

Prashant Raut is a successful professional stock market trader. He is an expert in understanding and analyzing technical charts. With his 8 years of experience and expertise, he delivers webinars on stock market concepts. He also bags the ‘Golden Book of World Record’ for having the highest number of people attending his webinar on share trading.