Muhurat Trading: Key things to know

12 Nov 2020  Read 1102 Views

The world is full of different people, cultures, traditions, languages, customs, and beliefs, but when it comes to the most diverse country in the world with numerous cultures within itself, India is the name that hits everyone's mind. Every part of India has a distinct food, clothing styles, languages, which makes it a diverse place.

Not only this, but the festivals of India are also something that attracts the attention of the whole world. But amongst those long lists of festivals, Diwali is among the most important and auspicious festivals of India. 

Diwali, the festival of lights, worship, sweets, and decorations, comes with good fortune for all. The impact of this festive season is seen throughout every industry, every business, every household, and families. And so, even the trading world has not been away from this. 

Yes, the traders of India have their own way of celebrating the festival of lights and good fortune. And this tradition of the Indian traders is called muhurat or muhurat Trading

What is Muhurat Trading?

Being an Indian, you must have come across the term 'muhurat'. A muhurat is an auspicious or promising time as per the Hindu calendar. In India, the time and date for doing any fortunate work whether it's a marriage, imagination ceremony, or anything, is set based on the 'muhurat'. The muhurat can basically be understood as a 'lucky time' to do any activity.

Hence, the trading which is done during the one hour time that is considered lucky for investing in shares on the day of Diwali is known as muhurat Trading. Every year, the time of muhurat trading is specified by the stock exchanges. 

As this time duration is deemed to be lucky, there is a belief that people investing during these peak hours have greater chances of earning money and wealth through investing. This muhurat is generally at the time of the Laxmi pooja; hence people buy shares as a token of Goddess Laxmi, who is the Hindu goddess of wealth.

As the whole scenario circulates around an Indian festival, this tradition is just limited to the Indian stock exchanges and nowhere else.

When did muhurat Trading start?

So, how did it all start? What is the history behind this ritual? 

Traditionally, stockbrokers used to commence their new year from the auspicious day of Diwali. Thus, they would open new accounts for the settlement for their clients on the festival of Diwali during "the muhurat".  

The Chopda Pooja was also performed by the community of brokers, where the businessmen used to worship their books of accounts during the Diwali pooja. There were numerous notions that were linked with the ritual of muhurat trading. 

The primary thing about Muhurat Trading was that most of the Marwari traders/investors used to sell stocks during the muhurat time since they believed that money should not enter into the home on the occasion of Diwali, whereas Gujarati traders/investors bought shares during this period. While there is no data to back this, in modern times, this doesn't exist. 

In today's times, muhurat trading has become more of a symbolic gesture than a cultural one as people consider the moment to be lucky and auspicious. Laxmi Pujan (pray to Goddess Lakshmi) is done by most of the Hindu investors, and after the pooja, they buy shares of companies that could possibly produce favourable returns in the long-run. 

What are the timings of Muhurat Trading 2020?

A lot of investors, both existing and new, are planning to invest their money on the day of Diwali. For them, here is a table that shows the muhurat Trading Time 2020 for both BSE and NSE

Muhurat Trading Session

Capital Market

Block Deal Session

17:45 – 18:00 hours

Pre-Open Market

18:00 – 18:08 hours

Normal Market

18:15 – 19:15 hours

Call Auction Session

18:20 – 19:05 hours

Closing Session

19:25 – 19:35 hours

What actually happens in Muhurat Trading?

Both NSE (National Stock Exchange) and BSE (Bombay Stock Exchange) permit trading for a limited time on the occasion of Diwali. Generally, the period of muhurat Trading is divided into the following parts: 

1. Block Deal Session- In this first session of Muhurat Trading, two parties decide to buy and sell a security at a fixed price, after which they inform the stock exchange about it. 

2. Pre-Open Session- In this session of Muhurat Trading, the stock exchanges specify the equilibrium price. This usually lasts for about eight minutes. 

3. Normal Market Session – It is a one-hour session during which most of the trading takes place.

4. Call Auction Session – In this session, the trading of illiquid securities is done. If the security satisfies the criteria set by the exchange, then it is termed as illiquid.

5. Closing Session – It is the final session of the evening where traders or investors can place a market order at the closing price. 

Things to be kept in mind before Muhurat Trading

Muhurat trading is considered very beneficial at the investors' end. However, there are some aspects that should be considered before indulging into such trading systems. These are listed below: 

  • As mentioned earlier, this period of the festive season is considered to be promising to make investments by most of the traders and investors.
  • At the end of the trading session, all the open positions will result in settlement obligations.
  • While the session of muhurat trading will be done on Saturday (November 14, 2020), the markets will be closing on Sunday and Monday (November 16, 2020), on account of Diwali Balipratipada.
  •  A close eye must be kept by the traders on the resistance and support levels. It has been observed that during the muhurat trading session, the markets can be unstable with no particular direction. Therefore, as a day trader, keeping the resistance and support levels as the main basis of your trading judgments will help you to make better trading decisions.
  • Another thing to be taken care of is that the Investors must assure that they stick with the fundamentals of a company before they invest in its stock for the long-term. The session of muhurat trading is typically filled with a lot of enthusiasm, and rumours can spread fast. 
  • If you are seeking to get benefited from the volatility, you must ensure that you select stocks that are of good trading volumes as the trading window is only for one hour.
  • Investing during this period does not guarantee returns at all. Even if the stock is performing well during the period of Diwali, its performance in the future will depend only on its fundamentals and other macroeconomic factors. Therefore, smart investing could be the only way to save yourselves from any future losses. 

Who could benefit from Muhurat Trading?

The ritual of muhurat trading is a popular practice in India. Hence, the trading volume during the auspicious times of Diwali are always high. Everyone jumps into muhurat trading with the hope of getting benefit out of it in the future. 

Also, the market is usually bullish since the festive spirit based on prosperity and wealth pushes people to be positive about the stock markets and the economy. Hence, it is a decent time for both investors as well as traders, both existing or experienced and the new in the game, to benefit from the muhurat trading session.

India is loaded with people who are superstitious and always consider the muhurat before indulging into any new activity or work. For them, the auspicious occasion of Diwali could be a good time to indulge into trading and the stock market. 

The long runners of the trading world or we could say the experienced day traders can profit from this session of muhurat trading since most investors or traders will buy and/or sell stocks just as a gesture to concede the auspiciousness of the day of Diwali Poojan. 

Conclusion

Diwali is not just the festival of lights or sweets, but it's that one celebration that comes with a lot of opportunities for the people. One such opportunity waiting to be grabbed is Muhurat Trading, which is just another ritual that is performed during the jolly night of Diwali. However, there are many who benefit from this 'ritual'.

There are thousands of people in our nation who are just waiting to start testing their luck into the trading sector but are not getting the right time. In such a case, "the muhurat" is the perfect time to set your foot in the trading waters. 

You just have to make your mind and start searching for a company whose stocks you want to own this Diwali.

Happy (and smart) investing!! 

About the Author: Aditi Sagar | 26 Post(s)

Aditi is born and brought up in New Delhi. Right now she is in the 2nd year of her college. She is pursuing graduation from Deen Dayal Upadhaya College, Delhi University with Bachelor's In Management Studies degree. 

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