According to Vikram Samvat – one of the calendars followed by Indians, Diwali marks the beginning of a new financial year. This is why it is considered auspicious in India. Diwali is not only a time to give gifts and distribute sweets, but also a time to invest in 'stocks'. Yes! You heard it right. Apart from investing in precious metals like gold and silver, buying stocks has also become a custom for many investors.
But Diwali is a public holiday and the stock exchanges are closed on holidays, so how can you buy stocks on that day? The answer is the 'Muhurat trading' session. Let's discuss everything you need to know about it - its meaning, history and the benefits of buying stocks during this session. Read on! You know you're curious!
What is Muhurat Trading?
Indians give importance to rituals and they like to do things in the right Muhurat. Muhurat is the auspicious time in which any person or enterprise considers it good to do or start any of their work. It is believed that when any work is done during this time (in Shubh Muhurat), it is completed without any obstacles. One such Shubh Muhurat comes on Diwali.
On this holiday, the Indian stock exchange opens for a one-hour trading session called Muhurat trading. Every year, the stock exchange defines the day and time for this trading session. It is believed that buying and selling stocks during this one hour brings blessings from Goddess Lakshmi, the goddess of wealth.
So many people buy equities on this day. Some people also hold them for a long time and gift them to their generations.
What is the history behind Muhurat Trading?
Muhurat trading has been in practice on Indian exchanges for more than half a century. It was first conducted by the Bombay Stock Exchange (BSE) in 1957. The National Stock Exchange (NSE) then continued this legacy and introduced Muhurat trading in 1992.
For the investor community, this session symbolizes the New Year. On this day, stockbrokers close the old ledger and start working on the new ledger. Before this traditional trading session, stockbrokers perform 'Chopra Puja' i.e. worship of account books at the stock exchange .
Fun Facts
There are many beliefs associated with this trading session. One of them is that Marwari investors used to sell stocks during this Muhurat as they believed that money should not enter the house on this day. On the other hand, Gujarati investors bought stocks during this session. But there is no data available to support this and it is not true in today's time.
Who can invest during Muhurat Trading?
Any investor or trader can invest during this session. But just because it is an auspicious time, you should not invest blindly. Do research after careful analysis and invest in good stocks only after ensuring their identification otherwise you may have to suffer losses.
Process of Muhurat Trading
This trading session is divided into the following 5 components:
Block Deal Session: During this, two parties decide to buy or sell stocks at a pre-decided price and inform the stock exchange about it.
Pre-open session: During this, the exchanges determine the equilibrium price before the market opens (usually around 8 minutes before).
Normal Market Hours: This is the one-hour session in which most of the trading takes place.
Call auction session: During this, illiquid shares are traded. If the security meets the criteria set by the exchange, it is classified as illiquid.
Closing session: Here, traders and investors place market orders at the closing price.
What is the Muhurat Trading timing?
This year too, both BSE and NSE have allowed Muhurat trading on Diwali, i.e. 1 November 2024.
What are the benefits of Muhurat Trading?
This is a good time to buy/sell shares as the trading volume is high during this session. High trading volume indicates that there is a lot of interest or activity around the stock market.
This is considered an auspicious time, so if you are a first-time investor you can start investing on this day.
This is a very good opportunity for experienced intraday traders because the market is usually bullish during this session. But there have been many instances when the market has seen a decline the very next day. Therefore, it is very important to be cautious and invest or trade only after thorough research.
If you are someone who is still looking for the right Muhurat to start investing then Muhurat Trading is your lucky day. Look for stocks that are backed by strong fundamentals, have growth potential and have good cash flow.
If you are not sure which stocks to invest in, you can start your research using screener. It has over 200 filters that let you quickly filter through a plethora of stocks based on relevant key metrics.
In addition to screeners, check investment analysis tools such as comprehensive asset pages for stocks, mutual funds, ETFs, indexes, market mood index and more.
Don't miss this once in a year opportunity to invest in stocks at an auspicious time. Wishing you a very Happy Deepawali and may this Muhurat trading session bring you good luck!
