Diwali Muhurat Trading 2024: Significance, Timings, and Strategies
It is that time of the year again! Yes, the one day all investors and traders vouch for to be auspicious – Diwali.
And what's more thrilling for traders during Diwali than Kaju Katli? You guessed it—Muhurat Trading!
According to the Hindu calendar, Indian traditions and culture emphasise ‘Muhurat’ as the best time to start something good, something shubh. That's why most people buy a few shares on the auspicious day of Diwali during the muhurat hour.
In the digital world of WhatsApp, investors are flooded with Diwali picks from various brokerage houses. They make it a norm on Diwali to recommend stock ideas for the next Samvat.
So, let’s dig a little deeper into Muhurat trading and how to begin investing for the year ahead.
What is Muhurat Trading?
Muhurat Trading is a special, symbolic trading session conducted on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) in India during Diwali, one of the most auspicious Hindu festivals.
The word "muhurat" means "auspicious time," and the session typically lasts an hour in the evening on Diwali, marking the beginning of the traditional Hindu accounting year, Samvat.
The significance of Muhurat Trading is tied to cultural and religious beliefs, where it is considered highly fortunate to begin new ventures on Diwali.
Despite the limited time, Muhurat Trading usually attracts a lot of participation, and the stock market tends to witness positive sentiment during this time.
History of Muhurat Trading
The tradition of Muhurat Trading dates back to the time when stockbrokers aligned their financial year with the Diwali festival. Diwali marked the start of their new year, and brokers opened fresh settlement accounts for clients during this special period.
As part of the ritual, the broking community would perform Chopda Pujan, where they worship their account books, symbolising an auspicious start to the financial year. This custom continues in many business families today.
Historically, it was said that Marwari traders often sold stocks during the Muhurat, as there was a belief that money should not enter the household on Diwali. On the other hand, Gujarati traders were known to buy shares during this time, as they welcomed wealth into their lives.
Today, Muhurat Trading is largely symbolic, representing the harmony of tradition and modern financial practices. Many Hindu investors perform Lakshmi Pujan - a prayer to Goddess Lakshmi before investing in fundamentally strong companies.
Muhurat Trading Timings: 2024
This year, Muhurat Trading is expected to occur on Friday, the 1st of November 2024.
The timing for the Muhurat trading session is 6 PM to 7 PM.
What Happens in Muhurat Trading?
Here’s what happens step by step during the special trading session -
Fixed Time Slot
The exchanges announce a specific time, typically in the evening, for the Muhurat Trading session. This period usually lasts one hour, and the exact timing is determined based on astrologically favourable moments, known as the "muhurat."
Chopda Pujan
Before the trading session begins, many brokers and traders perform Chopda Pujan, a traditional ritual in which they worship their account books and trade tools.
Trading Session
During the hour-long session, the market operates like any regular trading day. Investors can buy and sell stocks, but the sentiment is largely positive, with many traders making small, symbolic investments. Instead of focusing on short-term profits, they aim to invest in quality stocks with long-term potential.
Lakshmi Pujan
Investors perform Lakshmi Pujan before or during the session, offering prayers to Goddess Lakshmi. Buying shares during this time is believed to bring good fortune and financial success for the year ahead.
High Participation, Low Volatility
Although it's a short session, participation levels are high, and trading volumes tend to spike due to the occasion's symbolic importance.
Closing Bell Ceremony
After the trading session ends, there is a sense of celebration, especially on the trading floors of major exchanges. The closing bell ceremony is often marked with festivities, reflecting the joyous mood of Diwali.
During the trading session, there are multiple sessions in between, such as a pre-opening session, a block deal session, a call auction session, and others. The timings for all these sessions will be notified in due time.
Benefits of Muhurat Trading
Muhurat Trading offers a fresh start. It encourages long-term, low-risk investments with a positive market sentiment.
It's an educational opportunity for new investors, as families often introduce them to stock trading during this symbolic session.
Muhurat Trading also allows investors to review and refresh their portfolios, while brokers use the occasion to strengthen client relationships and build goodwill.
How to be Prepared for Muhurat Trading?
We must have spoken to dozens of experts and friends recently, and nearly everyone wanted to discuss the stock market.
Forget experienced people; even newbies are now worried about how much further this market can go.
It is slowly dawning upon them that making money from stocks can't be easy. There has to be a catch somewhere.
Perhaps a big crash is lurking around the corner, and it may take away many of the profits they've earned over the last 24 months or so.
Our advice to them was simple: If their portfolio is giving them sleepless nights and making them increasingly nervous, perhaps it is time to lighten up and get rid of stocks that are up a lot but are fundamentally not that strong.
The famous JP Morgan even had a term for this: 'Selling down to the sleeping point'. The idea is to move out of stocks to the extent that one can have sound sleep at night.
Have you zeroed in on your sleeping point yet? Is it comfortable enough for you? Do share your views in the comments section below.
This was for the selling bit. What about new stocks to buy?
Given the pricey valuations, the quality of the business matters more than growth. To assess quality, you need to dig a lot deeper than growth guidance and assess whether the business generates enough cash to fund the growth or if it needs to burden the balance sheet with debt to fund its future growth.
When you pick stocks this Diwali season, my advice is to avoid falling for growth at any price and assess the quality of growth as well.
In Conclusion
We all want our stock portfolios to create wealth, but each investor's approach varies. Some focus on long-term gains, others on short-term profits, and some prefer regular dividends. Many even maintain separate portfolios for trading and investing.
Thus, strategies differ, and that's perfectly fine. As we enter Samvat 2081, align your strategy with your personal goals for muhurat trading. If you're already investing this way, well done, you’re all set!
Ultimately, know what you want from your portfolio and stay committed to it.
Happy investing and we wish you a prosperous new year ahead!
Disclaimer: This article is for informational purposes only and does not constitute financial advice. It is not produced by the desk of the Kotak Securities Research Team, nor is it a report published by the Kotak Securities Research Team. The information presented is compiled from several secondary sources available on the internet and may change over time. Investors should conduct their research and consult with financial professionals before making any investment decisions. Read the full disclaimer here.
Investments in the securities market are subject to market risks, read all the related documents carefully before investing. Please read the SEBI-prescribed Combined Risk Disclosure Document before investing. Brokerage will not exceed SEBI’s prescribed limit.
FAQs on Muhurat Trading
What is Muhurat trading?
Muhurat trading is a special, symbolic one-hour trading session held on the day of Diwali. According to the Hindu calendar, it signifies the beginning of the new financial year and is rooted in the belief that trading during this "auspicious hour" brings prosperity and wealth. Investors often perform token trades to mark the occasion, believing it leads to long-term success.
What are the timings for Muhurat trading?
The exact timings of Muhurat trading vary each year, but it typically lasts about an hour in the evening on Diwali day. The stock exchanges, such as BSE and NSE, announce the official schedule a few days before Diwali. This year, Muhurat trading will take place on November 1, 2024. The pre-open session will run from 5.45 PM to 6 PM, followed by the continuous trading session from 6 PM to 7 PM.
What happens in Muhurat trading?
During Muhurat trading, investors and traders engage in stock market trading as a ritual to mark the beginning of a new Samvat (Hindu calendar year). The session is largely ceremonial, with many participants making small, symbolic investments.
What are the benefits of Muhurat trading?
Diwali Muhurat trading is believed to bring good fortune that will lead to prosperity throughout the year, and many investors take this opportunity to make long-term investments. While the primary benefit is symbolic, many investors use this time to start long-term investments, anticipating lower market volatility and the positive sentiment associated with Diwali.
Is Muhurat trading profitable?
While many traders have reported gains from Muhurat trading, it's not guaranteed. The session often features lower trading volumes and increased sentiment, which can lead to market fluctuations. Investors should approach Diwali Muhurat trading from a long-term perspective rather than expecting immediate profits.
Who started Muhurat trading?
The tradition of Muhurat trading began in 1957 with the Bombay Stock Exchange (BSE), and the National Stock Exchange (NSE) adopted it in 1992. This practice holds great significance for stockbrokers, traders, and investors in India, as they consider Diwali the start of their new financial year.
Does the market rise during Muhurat trading?
Market behaviour during Muhurat trading time is influenced by prevailing conditions, and while the sentiment is generally optimistic, there is no guarantee of a rise every year. Traders should avoid assuming a guaranteed uptick simply based on tradition.
Is intraday trading allowed in Muhurat trading?
Yes, intraday trading is allowed during Diwali Muhurat trading, allowing traders to buy and sell within the same session. However, given the brief window and generally lower volumes, intraday traders need to act quickly and be aware of the potential for volatility.
Can we trade in F&O during Muhurat trading?
Yes, F&O trading is allowed during the Diwali Muhurat trading Stock Market session, , just as in regular trading hours. However, traders should be cautious as the session may have lower liquidity, impacting price movements in F&O contracts.
Is it necessary to participate in Muhurat trading?
No, it is not mandatory to participate in Diwali Muhurat trading. Many investors do it for tradition and to mark the start of the financial year on a positive note, but it is entirely voluntary.
Are the trading rules and regulations different for Muhurat trading?
The rules and regulations for Muhurat trading time remain the same as those for any regular trading session. The difference lies in the duration of the session and the ceremonial importance attached to it. Regulatory norms, order types, and trading mechanisms function identically to regular market sessions.
Can we sell stocks on Muhurat trading?
Yes, you can sell stocks during Muhurat Trading, just as you would in any other market session. However, the focus is typically on buying due to the belief in starting the new financial year with fresh investments.
Is Options trading allowed in Muhurat trading?
Yes, Options trading is fully allowed during Muhurat Trading. As with other instruments, traders can buy or sell options, but it's important to be mindful of potential liquidity issues and price movements due to the short duration of the session.
Which stock exchanges in India allow Muhurat trading?
Both NSE and BSE hold Diwali Muhurat trading sessions every year. These Exchanges follow the same schedule for the trading window.
What are the risks associated with Muhurat trading?
Muhurat trading sessions can be more volatile than regular sessions because it is held only for an hour and driven by festive sentiment. While many participate with optimism, it’s important to trade wisely and not be swayed by market excitement during the Diwali Muhurat.
Is Muhurat trading different from regular trading?
The primary difference is the timing and cultural significance attached to Muhurat trading. Operationally, it functions the same as regular trading, with the same rules, instruments, and platforms.
