The stock market is one of the most advanced indicators of an economy; it is highly sensitive and can react positively or negatively with the immediate effect of any action or reaction that will have an impact in the near future. Hence, you need to understand the key factors that usually affect the market and the top ten things to know before the market opens.

Knowing these things or keeping yourself updated with such things will not only help you to understand the latest condition or the market but also help you to trade with the right strategy. Based on the market situation you can enter into the right trade position that will not only make your trading sessions profitable but also minimize the risk due to such factors.

Also Read: Types of Risks Associated with Investing in the Stock Market

10 Things to Know Before Market Opens

These things we are going to discuss below are also types of systematic as well as unsystematic risks that directly or indirectly affect the stock market movement. However, the market is affected by various factors that can influence the market immediately or later depending on the impact of such things. But sentiments of traders and investors are influenced by such news or events immediately and their actions are clearly visible in terms of market movement.

1.Update with Geopolitical Conditions

Let’s start with the Geopolitical condition of the country. You should check the international relationships of the country, international trade and wars or any other conflict with other countries or with the international community that can affect the economic condition of the country. Check your country-related international news and geopolitical actions.

Any kind of negative relation or tension with neighbouring nations or trade partners can also affect the sentiment of the stock market in the country. At the same time, positive developments in international trade relations boost the market sentiments. Hence, you need to check or consider the latest geopolitical conditions of the country before the market opens.

2. Check the Trends of All Major Global Markets

The domestic market is highly influenced by the other stock markets of major countries like the US, UK, Europe and other developed nations. Hence always check the global indices like NASDAQ, Dow Jones, CAC, DAX and FTSE, to know the trend of the global markets. Based on these international counterparts, the domestic market also moves.

Also Read: Know Everything About  All The Major  Global Market Indices

The US and European markets open late, and ends even after the closing of the domestic markets, as their operational timings are different due to different time zones. Hence, what happened over the last night in the developed markets will also encourage the developing markets. In the early morning, you can also check Asian markets Nikkie, Shanghai and Han Seng that open before the Indian market to take the cues of these market trends.

3. Economic Activities Data & Key Indicators

You need to keep checking regularly the economic development-related data that comes weekly, monthly, quarterly, half-yearly or annually. These economic indicators like GDP Data, IIP Data, Inflation, Employment Data, Forex Reserve or Trade Deficit etc. will show you the growth of economic activities in the country that also affect the market.

A positive GPD or IIP numbers boost the market sentiments and also encourage investors to invest more aggressively pushing the market index upwards. While the high inflation or high trade deficit and deprecating of currency value will discourage the inventors, as central bank can take monetary actions to control such factors that can also affect the financial markets.

4. Government Policies & Regulatory Actions

You also need to watch the policies and regulatory actions taken by the central or state government towards the corporate world and listing companies or any legal entity that can also affect the stock market. The government can change the taxation policies, impose duties or taxes or take action to control the export or import of various goods and services.

Government authorities or sector-specific regulatory bodies can increase or reduce taxes, amend foreign investment policies, or take regulatory actions to some specific sectors like banking, telecom, alcohol, infrastructure real estate etc. Any kind of positive or negative policies or regulatory actions also have the same impact on the listed companies.

5. Check the Currency Price & Fluctuations

The value of the domestic currency Rupee (INR) against the major intentional currencies like USD, GBP and Euro keeps fluctuating all the time. You need to keep checking the value of INR against these currencies, especially against the USD, if INR is appreciating, it is a good sign or better economic conditions but not good for export-oriented companies that have major revenue earnings from the global market, and this will also affect the broader market.

Also Read: Factors Affecting Foreign Exchange Rate: Why Currency Fluctuates

Apart from that deprecating the value of INR against USD is good for exporting companies but not good for the economy, as it can increase the trade deficit due to an increase in the cost of import and also decrease the foreign exchange reserve of the country. While the companies importing the goods or raw materials will have a positive impact on the stocks of such companies.

Apart from that, currency fluctuations or continued depreciation will also encourage the central bank to take monetary actions, because currency fluctuations also fuel inflation and interest costs. The tight monetary policy will slow down the growth of the economy which will create a negative sentiment among investors resulting market falling down.

Also Read: USD INR Options Trading Strategies Beginners Guide to Trade

6. Check the Commodity Market & Gold Price

Key commodities prices also influence the financial markets. Hence before the stock market opens you should also check the major commodities prices like crude oil, gold, silver industrial metals etc. As there is an inverse relationship between the stock market and the commodity market, the increase or decrease of commodities will have an inverse impact on the stock market.

Also Read: Types of Commodities for Trading & Risk in Commodity Market

The rising price of commodities like Crude Oil and Gold will not only increase the import bill of the country but also increase the cost of various activities like logistics supply, transportation and industrial running. High Gold prices discourage investors from divesting their investment in this yellow and silver metal and putting it into the stock market.

Similarly, raising the cost of other industrial metals like steel, iron ore, aluminium, copper and alloy metals also increases the cost of industrial production of various sectors like automobile, capital goods, construction and engineering companies. This will affect the listed companies in these sectors and also have an impact on the entire stock market.

7. Activities of FIIs & Institutional Investors

Institutional investors especially foreign institutional investors (FIIs) play a very important role in the significant movement of the stock market. Hence, you need to check their buying and selling activities, as when these institutional investors pour huge amounts of money into the market, and then you can see there is a bullish trend with strong movement in the market.

From time to time FIIs buy or sell a huge number of stocks in the market, and DIIs also do the same when reshuffling their portfolio as per the market conditions. A huge inflow and outflow because of these institutional investors drive the market movement. Hence you always need to check the activities of these intuitional investors before taking any positions.

Also Read: What to Research & Analyse Before Buying a Stock of a Company

8. Corporate Actions & Key Announcements

The companies listed in the stock market are mandatory to keep publically updating every action related to the company. These corporate actions include mergers or acquisitions, capex plans, declaration of quarterly financial results and any type of other actions that can affect the share price of the company, all need to be reported to stock exchanges and also informed to each investor.

Also Read: Five Corporate Actions and Its Impact on Stock Prices

Any kind of positive action can boost the share price of the company, while negative actions by the companies can discourage its investors from selling the shares. Hence, every morning before the market opens, check the corporate actions and news, especially if you have shortlisted any stock to buy or sell with a long-term view or take a trade position intraday or for short-term trading.

9. Check the Current Market & Sector Trend

Checking the trend of the market and the sectors is very important to get an idea about which sector is trending in the upward or downward direction. You can check the previous day’s trading sessions to know the latest trend, and if possible check the pre-market opening cues from global markets, economic news and other activities to predict the new trend.

Also Read: How to Identify Trend in Stock Market: 10 Points to Find Trend

Similarly, analysing the sector or industry-based trend is very important to find the right stocks for trading from that trending sector. Different sectors of the economy have different trends at different points in time, so you should keep monitoring the performance of these sectors. The increase in most of the stock in a particular sector indicates the positive sentiments of the investors making the sector trend upwards also have a substantial impact on the entire stock market.

Also Read: How to Find Trending Stocks for Intraday Trading: Ten Rules

10. Perform the Technical Analysis for More Insights

Every time before the market opens you should use technical analysis to understand market movement, trends and other trading-related various aspects. You can analyse the candlestick chart patterns and use popular technical indicators like RSI, Moving Averages or MACD, Bollinger Bands and Fibonacci Retracement to identify the undervalued stocks.

Also Read: How to Find or Determine Undervalued Stocks: 10 Best Ways

Moreover, performing the technical analysis will help you to know the various technical aspects of the market or individual stocks like the latest trend, trading volume and buying or selling zones. From a trading perspective using technical analysis is very important to make a well-informed decision while taking any positions in intraday, short-term or future and options.

Also Read: Is Technical Analysis Useful or Useless or Enough for Trading

Other Key Things to Know Before the Market Open

Apart from these key factors that affect the market movement you also need to check the impact due to other market segments like derivatives. Yes, the monthly expiries of the future and option contracts also have short-term or intraday impacts on the market movement.

Also Read: Golden Rules for Trading in Stock Market: Top 10 Basic Rules

Hence, make sure the day is not the expiry day of such contracts. Though, for the Indian stock market, the last working day Thursday is the expiry day, this stock exchange automatically squares off all the open trade positions in F&O segments.

Moreover, traders also manually square off their positions, so there could be profit booking or short-covering situations in the market at a large scale that will also influence the market movement in any direction as per the buying or selling pressure. Hence, don't ignore the F&O expiry day or avoid trading on this day, as their no clear trend in the market on expiry day.

Final Thoughts

Nevertheless, the stock market is affected by various factors from economic activities to sector or industry-specific trends and company-related corporate actions. Though, there are certain things not affect the market overnight but can have an impact sooner or later and the market discounts such news or events to offset the valuation of companies due to such impacts.

Also Read: What are the Top Factors Affecting the Stock Market in India

Hence correlating the impact of these factors with market movement is not an easy task, you must have the knowledge and experience to perform the fundamental analysis and technical analysis. Apart from that you should have reliable resources, tools and software to perform the market fundamental or technical analysis at your computer system.

Also Read: Technical Analysis vs Fundamental Analysis: Which is Better

Don't worry if you don't have such resources to perform the analysis you can become a client of a discount broker or full-service broker and get all such services freely through your trading account. You just need to open a demat and trading account with these brokers and you will get the advantage of using a trading platform having all such resources and features.

Also Read: Choosing the right broker: Decoding the mystery of lowest brokerage charges

You can choose Moneysukh – one of the best discount brokers in India providing the best online trading platform for investing and trading in equities, commodities and the forex market. Here you will not only enjoy the best features demat account but also get daily updates and tips on market news, corporate events and recommendations to buy or sell stocks for intraday trading or short-term trading, options trading and from the long-term investment point of view.

Also Read: Things to Consider Before Buying Stocks for Long Term: 10 points