India's Plan to Extend Trading Hours Will Drive Up Costs, Birla Says

March 20 (Bloomberg) -- India’s proposal to narrow the gap between local and overseas securities trading hours may be spurned by investors on concern it will boost costs, Birla Sun Life Asset Management Co. said.

Trading hours for stocks and derivatives may be increased, the Securities and Exchange Board of India said yesterday, seeking market feedback over the next three weeks.

“It will make life miserable,” Birla Sun Life’s Chief Investment Officer A. Balasubramaniam said in an interview late yesterday. The nation’s third-largest money manager oversees $9.6 billion of assets. “We should trade fewer hours as it will improve productivity.”

The local market would have to open 3 1/2 hours earlier at 6:30 a.m. to match the start in Singapore, where trading volume of India’s Nifty stock futures has surged 10-fold since February 2007. Higher costs outweigh any benefits from eliminating the delay, said Samir Arora, who runs an India-focused fund at Helios Capital Management.

“There should absolutely be no change or increase in timing,” the Singapore-based hedge fund manager said. “Investors and fund managers would be better off spending more time in analysis and research, which is best done when the markets are closed.”

Daily trading of Nifty futures in Singapore rose as high as 23,404 contracts last month from a peak of 2,266 contracts in February 2007, data compiled by Bloomberg show.

Singapore License

The National Stock Exchange of India, which licensed its benchmark S&P CNX Nifty Index to the Singapore Exchange, proposed the change because investors don’t want the gap, the Indian exchange said in an e-mailed response to questions late yesterday. The proposal isn’t linked to the Singapore Exchange’s license, the Indian bourse said.

“The feedback from our members is that it is inevitable over a period of time trading hours are extended and are more in line with international benchmarks,” National Stock Exchange said. It will extend the hours “when there is broad consensus from market participants,” the bourse said.

The National Stock Exchange was ranked the second-largest derivative bourse globally in 2007 in terms of the number of contracts traded in single-stock futures.

Nifty futures start trading on the Singapore Exchange at 9 a.m. Singapore time, or 6:30 a.m. India time. Indian stock markets open at 9:55 a.m. local time and shut at 3:30 p.m., about the same time as the close of futures trading in the city- state.

‘Benefits Both’

“SGX believes that trading in its listed futures contracts benefits both the index futures as well as its component stocks in the home exchanges,” Singapore Exchange said in an e-mailed response to queries.

India’s 5 1/2-hour trading day is sufficient to keep the local stock market competitive, said Kenneth Andrade, head of investments at IDFC Asset Management Co.

“It’s anyway virtually the entire day,” said Andrade, whose company oversees assets worth $1.8 billion in Mumbai. “If you can’t finish trading, you have to be inefficient.”

The cost to brokerages will “shoot up” as they would require two shifts to match Singapore’s opening, said Arun Kejriwal, founder of Kejriwal Research & Investment Services in Mumbai.

“Which country in the world opens its markets even before the newspaper is out?” he said. “Logistically, it will be a nightmare.”