Diwali, the Festival of Lights, is widely celebrated all over India. The festival symbolises the spiritual victory of light over darkness, or good over evil. It is believed to be an auspicious time and many traditions are followed during this period. One such special tradition in our own stock markets is Muhurat Trading. This is a very interesting concept that has been followed for nearly six decades. Let us understand how this tradition was introduced, and the specific details regarding it.

What is Muhurat Trading?

The term ‘Muhurat’ means ‘an auspicious time’. According to Hindu customs, Muhurat is a time when planets are aligned favorably to ensure positive results. Muhurat Trading is a one-hour special trading session on the day of Diwali, that has been approved by both the NSE and BSE. Muhurat is an occasion in which the investing and trading communities pay tribute to goddess Lakshmi, the deity of wealth and prosperity. It also marks the celebration of ‘Samvat’ or the New Year. 

Thus, according to traditions, people who trade during the Muhurat period have a better chance of earning wealth and gaining prosperity throughout the year. This type of tradition is unique to our Indian stock markets only.

History of Muhurat Trading

When we look at the history of stock markets in India, many stockbrokers started their New Year from the day of Diwali. They would open new settlement accounts for their clients on the Muhurat, or the auspicious time.

The concept of Muhurat Trading was officially established in India in 1957 when it was approved by the Bombay Stock Exchange. The main factor for this has been attributed to two prominent business communities- the Gujaratis and the Marwaris. Interestingly, these communities have a century-old tradition of performing pooja of their ledgers and ‘wealth chest’ on the day of Diwali. Ever since the National Stock Exchange was established in 1992, it has also permitted trading for one hour on every Diwali evening.

Today, we can state that Muhurat Trading has become more of a symbolic gesture, and investors even conduct prayers when they purchase shares. It has also been found that during this period, people buy shares of strong companies that can generate good returns in the long-run.

The Muhurat Trading Timings for 2020

The Muhurat Trading session for this year will be held on 14th November 2020 (Saturday). The table below shows the Muhurat Trading Session Timings. The timings are applicable on both NSE and BSE.

Block Deal Session 5:45 pm to 6:00 pm
Pre-Open Muhurat Session6:00 pm to 6:08 pm
Muhurat Trading Session6.15 pm to 7:15 pm
Call Auction6:20 pm to 7:05 pm
Post-closing Muhurat Session7:25 pm to 7:35 pm

1. Block Deal Session – This is when two parties agree to buy/sell a security at a fixed price and inform the stock exchange about it.

2. Pre-Open Session – This is when the stock exchange determines the ideal opening price of a stock for the trading session.

3. Normal Market session – This refers to the one-hour session where the actual trading takes place.

4. Call Auction Session – This is a period when illiquid securities are traded. These are stocks that investors cannot find ready buyers because of their limited trading. 

5. Closing session – The period when traders can place a market order at a closing price.

Factors to Keep in Mind During Muhurat Trading

When we look at past records, the market has been usually bullish during Muhurat Trading. However, investors have to be careful while trading during this period. We must understand that most investors would prefer to buy stocks that have a potentially high return on investment (ROI). As always, investors need to make sure that the fundamentals of a company are strong, before investing in its stock.

Past records have shown that FMCG (fast-moving consumer goods) firms and two-wheeler segments have a probability to show very high growth. This is mainly seen in rural areas, as the festive season is an auspicious time to buy new products. Offers and other incentives would also encourage a high demand for these goods. 

At the same time, investors need to keep a close watch on resistance and support levels of stocks. Historically, it has been noticed that markets could be volatile during Muhurat Trading with no specific direction. Hence, better trading decisions can be made when the resistance and support levels are given high importance.

There could also be a lot of fraudulent activities such as free stock tip scams, which are very common during this period. Marketfeed has prepared a very detailed article on this issue as well. You can read more about it here. Make sure that you do not fall into any trap!

As intelligent stock market participants, make sure you watch out for those stocks which could show a potential boom during the festive season. Marketfeed wishes all our readers a very Happy and Prosperous Diwali!

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