ICYDK, Monday, October 24 is Muhurat day for the markets. What is it, you say? Read on…
Muhurat means an auspicious time. And many believe that while hard work is essential, your stars and planets should also be aligned for you to be successful. So they choose a ‘Muhurat’ before starting any activity.
Muhurat Trading is based on a similar belief. It's an auspicious 1 hour trading session on Lakshmi Pujan day during Diwali. It has been practised as a tradition by Indian traders for over half a century!
Why do we celebrate Muhurat Trading only during Diwali?
As per Vikram Samvat, the Hindu calendar, Diwali marks the beginning of the new year and many believe that trading on this day could bring wealth and prosperity throughout the year.
What are this year’s Muhurat Trading timings?
Muhurat Trading will be conducted on 24 October 2022 from 6:15 PM to 7:15 PM. All orders are placed only during this one hour, and normal trading hours are suspended. The stock exchanges issue circulars clearly specifying the finer details of this session. This year, the details are as follows:
|Diwali Muhurat Trading Session on Monday: October 24, 2022||Time (Hours)|
|Market opens||6.15 PM|
|Market closes||7:15 PM|
|Set up cut-off time for position limit/collateral value||7.25 PM|
|Trade modification end time||7.25 PM|
Source: NSE India website
Before the ‘normal market open’ time, there is a window of around 15 minutes for pre-open trades. The first 8 minutes from 6:00 PM to 6:08 PM are dedicated for order entry. Order matching is done in the next seven minutes.
Did you know?
Historically, this day has rarely disappointed investors, with the benchmark indices closing higher in 11 of the last 15 such sessions. While the indices have performed well on these special trading sessions, low trading volumes have been observed and fewer stocks move on this day. The only exception was 2008, when the Sensex climbed 5.8% in just 1 hour!
Dos and Don’ts of Muhurat Trading
There are many beliefs linked to Muhurat trading. For a few, this is the time to bring home Goddess Lakshmi. Hence, they insist on purchasing stocks of fundamentally strong companies. Market participants believe that stocks bought in Muhurat Trading bring in good luck and usually keep them for the long term. Over the years, Muhurat Trading has become a manifestation of positivity, hope and festival mood.
Here are a few factors investors need to keep in mind before participating in Muhurat Trading:
- Though Muhurat Trading is a part of the Diwali celebrations for some, trades initiated on that day come with settlement obligations. If an investor has bought some shares and they do not square off before the session closes, then they have to pay the broker in full to accept the delivery of stocks. If a trader has sold some shares, then she has to arrange shares for delivery. Failing to do so will invite penalties through the auction mechanism.
- Muhurat Trading window closes at the end of one hour. This short window is more for token trades. Traders have to be extra careful on this day. The short period of one hour may not be adequate for day traders. Also given the short period of trading, the market can be very volatile and the prices may move in an unanticipated direction.
- This year, market participants have to be extra careful. October 26, 2022 is a market holiday on the account of Diwali Balipratipada, which means it is a short week with just three full trading days. With global markets being volatile, be careful while trading in this truncated week.
- For investors keen on long-term investing, Muhurat Trading can be a good starting point. Pick a company with strong fundamentals and healthy growth prospects to invest in and buy the shares on Muhurat Trading. There is no need to deploy all your money on this day. You can gradually accumulate shares with time. Savvy investors may also buy shares of more than one company if they are convinced about growth prospects and attractive valuations.
- In the recent past, it has been observed that young investors keen on long-term growth have bought units of Exchange Traded Funds (ETFs) that track different indices. An ETF that tracks indices like the Nifty50 or the Nifty Next50 offers a diversified exposure to Indian stocks. Such units too can be kept for the long term.
To sum up, Muhurat Trading is not just celebratory investing. Investors have to act in a prudent manner. Wealth can be accumulated over a long period of time by sticking to good quality companies bought at attractive valuations.
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