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. Read More: Muhurat Trading 2024: History, Significance, and Participation

Read More: Muhurat Trading 2024: History, Significance, and Participation

Muhurat Trading Timings: 2024

This year, Muhurat Trading is expected to occur on Friday, the 1st of November 2024. The timings for the Muhurat trading session shall be notified once the exchanges finalise it.

What Happens in Muhurat Trading?

Here’s what happens step by step during the special trading session -

1. 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."

2. 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.

3. 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.

4. 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.

5. 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.

6. 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.