The term ‘muhurat’ itself translates to ‘auspicious time’. It implies that the planets have aligned in a manner favorable for giving positive results. The tradition of muhurat trading is now followed by stock exchanges in India. The day is marked by traders placing customary trades. The Bombay Stock Exchange (BSE) has been carrying out muhurat trading for fifty years now, but the first instance of muhurat trading in India dates back to 1957.
Traditionally, brokers used to close their clients’ accounts during Diwali to make the most out of the auspicious time. They would also worship their accounting books in a ceremony called the Chopda Pujan. Some traders would also sell stocks on Diwali day because they believed that money should not enter their house on the day of Diwali. On the other hand, traders in other parts of India believe in buying shares during this time.
Both the BSE and the National Stock Exchange (NSE) allow trading for a special window of time. This muhurat trading session comprises of –
- Block deal session wherein two parties come together to buy/sell their security at a fixed price.
- Normal market session is an hour-long session in which most of the trading takes place.
- Pre-open session of about 8 minutes in which the equilibrium price is determined by the exchange.
- Call auction session in which trading of illiquid securities takes place.
- Closing session wherein traders place their market orders at the closing time.
Diwali Muhurat Trading Tips
Muhurat trading is a special time for trading for traders and investors. This is why they need to place well-thought-out trades. Many investors believe that trades made during muhurat trading should amount to long-term investments. But, the catch is that because muhurat trading is restricted to just one hour, they must make fast decisions. A little preparation before muhurat trading can be incredibly helpful. Here is a comprehensive list of muhurat trading tips for diwali:
Time your investment: Diwali festivities may encourage you to splurge and make spur-of-the-moment decisions. But remember, you need not get swept up. It is wise to make a token investment to mark the occasion and then plan your investment strategy on it. Investing in a blue-chip stock is a good way to ensure this.
Assess your portfolio: Before you settle down to carry out muhurat trading, it is a good idea to go over your present portfolio and see whether you are satisfied with it. This is an opportunity for you to rejig your asset allocation as per your shifting financial goals and strategies.
Good chance for first-time traders: If you have never traded in the stock market before, this is your opportunity to experiment.
Then what should you do?
Avoid intraday trading: Although SENSEX tends to remain bullish on such occasions, think twice before you select your stocks. Sometimes SENSEX sees a dip after the first festival day.
Choose your stocks carefully: Consider high returns and good cash flow when choosing your stocks. You can look at FMCG companies, PSU banks, NBFCs, and companies with strict governance standards.
Shortlist your stocks: Do your research in advance and create a shortlist of stocks you would like to invest in.
Focus on portfolio diversification: Consider adding different asset classes to your portfolio. In an age-old Diwali tradition, you can choose to buy gold in the form of sovereign gold bonds.
Monitor the market and technical indicators: Before muhurat trading, remember to study the market performance and also check all the technical indicators for your preferred stocks.
Muhurat trading is an opportunity to make a fresh start for traders. By carefully analyzing several trading tips & tricks, you can breathe new life into your investment portfolio. For seasoned traders and new investors alike, this is a time of hope and making a fresh start. It is a great chance to reassess your investment and visit several new options in which to invest so that your new year is truly a prosperous one.