April 17, 2020 at 8:45 PM #264725Nitin BhatiaKeymaster
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Will the Stock Market Shut Down? is a matter of curiosity for most of the retail investors. In the first place, we need to understand whether the stock market can be closed or not. In this video, I have shared the reasons why the stock market cannot be closed.
1. Open Futures and Options Contract: At any given point of time, Derivatives contracts of multiple expiries are being traded in the stock market. For example, Futures contracts of 3 months including the current month are traded simultaneously. If the stock market is closed then these open derivatives contracts will not be settled. It will cause very heavy losses to some traders.
2. Mutual Fund investments are another key reason. There is around 3.09 Crore Active SIP’s. If the stock market is closed then what will happen to these SIP investments. On the contrary, if any investor needs money and would like to redeem the mutual fund units then he/she will not be able to redeem his money in the hour of the need.
3. if the stock market is shut down then it might trigger panic selling sending wrong signals to the investors. An investor might think that stock market investments are not safe.
4. Closure of the Stock Market might cause a liquidity crunch among the Retail Investors. Many investors like me keep their savings in the Stock Market. They might not be able to liquidate their savings.
5. The Stock Market is the reflection of our economy. If the market is shut down then it might signal to the foreign investors or FPI’s that the Indian Economy is weak or raise doubt on the health of the economy.
6. It is a misconception that by closing the stock market we can stop the fall in the stock market. However, the re-opening of a stock market might cause a bigger fall as seen in the case of a Philippines stock market.
7. Other countries have not closed their stock market even after a big fall as the reputation of the country is linked to the share market.
Lastly, the stock market is deemed essential service therefore it cannot be closed.
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