Muhurat Trading 2024: History, Significance, and Participation

Muhurat Trading – It Happens Only in India

India is a land of diverse culture and unique rituals. From buying a TV, a car, or having a housewarming party, people try to find a “muhurat” for important decisions and occasions. This sentiment is also shared by traders and investors who flock to the markets to participate in muhurat trading every year on Diwali. Let us look at this tradition in detail.

An Age-Old Tradition That Carries on Today

Taking place on the first day of the new Hindu calendar – Samvat, the session is said to set the tone for the New Year. The word muhurat stands for ‘auspicious’, determined by the planetary positions.

The practice of muhurat trading is more than half-a-century old. It dates back to 1957 in the Bombay Stock Exchange. At that time, online trading was unheard of. The traders would gather at the floor, decked in festive wear to trade during this special hour. It was considered a good omen to trade on this day to appease Goddess Lakshmi.

Although the times have changed, the excitement surrounding this remains intact even today. Muhurat trading has evolved into more of a festive event, with investors making token orders for symbolic reasons. Businessmen and brokers in India open new accounts. And Lakshmi Pujan and Chopda Pujan (prayers held over books of accounts) are performed.

Today, muhurat trading is not just limited to the physical trading floors but is also celebrated on digital platforms, allowing a broader audience to partake in this time-honored custom. The session typically lasts for about an hour, during which traders engage in buying and selling with optimism and enthusiasm. The continuity of this tradition underscores the deep connection between cultural practices and financial markets, highlighting the belief in auspicious beginnings and the desire for prosperity.

Working of Muhurat Trading

Muhurat trading is a special session arranged by stock exchanges, typically lasting about an hour, during the Diwali festival. The exact timing is determined by astrologers, aligning with the most auspicious moment. During this session, traders and investors execute trades with the belief that it will bring good fortune and prosperity for the coming year. The atmosphere is festive, with participants often making token purchases to mark the occasion. Despite the short duration, the session is marked by high volumes and enthusiastic participation, reflecting the cultural and financial significance of this tradition.

What Happens in this One Hour?

The session is held only for an hour according to the Muhurat and is unique only to Indian stock markets! Typically, the session is divided into following parts:

• Block Deal Session – Two parties agree to buy/sell at a fixed price and inform the exchange.

• Pre-Open Session – Exchanges determine equilibrium price in an 8 minutes session.

• Normal Market Session – One-hour long actual trading begins.

• Call Auction Session – Illiquid securities are traded.

• Closing Session – Market orders can be placed at the closing price.

Who Can Benefit from Muhurat Trading?

Muhurat trading is beneficial for both seasoned investors and new entrants to the market. For experienced traders, it offers an opportunity to realign portfolios and make strategic investments at the onset of a new financial year. New investors can use this occasion to begin their investment journey, backed by the cultural belief of prosperity. Additionally, the festive atmosphere and the positive sentiment surrounding muhurat trading can lead to favourable market conditions, potentially resulting in profitable trades. The session is also an opportunity for investors to imbibe the spirit of auspicious beginnings and optimism.

Things to Consider Before Muhurat Trading

Before participating in muhurat trading, investors should consider a few key factors. Firstly, it's essential to understand that this session is more symbolic than strategic, so expectations of significant market movements should be tempered. Additionally, investors should conduct thorough research and have a clear plan for any trades they wish to execute. It is also advisable to be mindful of the heightened emotional and sentimental aspects of the session, ensuring that investment decisions are based on sound financial principles rather than just tradition. Lastly, keeping an eye on liquidity and market trends can help in making informed decisions during this unique trading session.

Should You Participate?

The BSE Sensex has generally remained flat with a positive bias in this special trading session every year. Trading volume is usually low and fewer stocks move during that short duration.

Sensex Over the Last Decade

Deciding to participate in muhurat trading largely depends on your investment goals and personal beliefs. If you value cultural traditions and see the session as an opportunity to make auspicious beginnings, it can be a meaningful experience. For those looking to strategically invest, the session may provide a chance to enter the market with optimism and potentially capitalise on the positive sentiment. However, it's crucial to approach muhurat trading with the understanding that it is largely symbolic and should not replace regular investment strategies or thorough market analysis. Participation can be both a cultural celebration and a financial opportunity, provided it aligns with your investment approach and objectives.

Investors should always stick to good quality companies and remain in sync with their investing strategy. Muhurat trading 2024 will take place on 1st November’24. So, are you ready for muhurat trading?

Wishing all of you a Shubh Diwali and Happy Investing!

Source: Economic Times, Livemint, Capitaline, Money Control, Economic Times, Dhan.co