Why is the opening price of a stock different from its previous day's closing price on Kite?
Let us first understand the meaning of closing price, the opening price, and how they are calculated for a stock.
The closing price is a stock's trading price at the end of a trading day. This makes it the most recent price of a stock until the next trading session. For equities, the normal market timing is from 9:15 AM to 3:30 PM. The closing price is calculated as the weighted average price of the last 30 minutes, i.e. from 3:00 PM to 3:30 PM in case of equity.
Calculation of closing price is explained below with an example :
So from the above example, it can be seen that the closing price is Rs 51.48/- which is different from the last traded price at 3:30 PM, i.e. Rs.54/-.
To know more about closing price and how it is different from Last Traded Price(LTP), click here.
The opening price is the price at which a stock first trades upon the opening of an exchange on a trading day. For equities, the normal market timing is from 9.15 am to 3.30 pm. But, the exchange starts collecting orders from people at 9.00 am till 9.08 am called as pre-market window, during this time, they collect the orders from the public and during the next 7 minutes before markets open, they match these orders to decide at what price the stock will open for the day at 9:15. To know more about market timings, click here.
So as you can see from the above explanation, there's a pre-market window with which the opening price is calculated, where depending upon the demand and supply of a stock, the opening price may be different from its previous day closing price.
In the hours between the closing price and the next trading day's opening price, several factors can affect the price of a particular stock. Some of the factors are :
After market order(AMO)
AMO has a major effect on the stock price between the closing and opening price because it means that orders are being placed even after the markets are closed, which results in changing the prices of stocks. To know more about After market orders(AMO), click here.
News about a company
News about a company can be released while the market is closed, changing what investors are prepared to pay to own a company's share and changing the price of the company's stock without any trades occurring. In most cases, Positive news would increase the stock price, whereas negative news would decrease the stock price.