Published on October 18, 2013
Demystifying Stocks What is Muhurat Trading?
A New Year • A new year means a new beginning for many. The calendar year followed by the world indicates 1 January as the start of a new year. • For most Hindus, the new year begins in summer. However, in Gujarati and Marwari traditions, the new year starts on Diwali. India’s stock markets are dominated by brokers belonging to these two communities. Hence, every year, Diwali assumes a special place for the stock market.
Muhurat Trading • The festival of Diwali is celebrated across the country as everyone welcomes the goddess of wealth – Lakshmi. It is considered an auspicious time to earn and spend money. Since wealth creation is a big function of the stock market – Diwali is an important day. • The stock exchanges open for Muhurat Trading - a special trading session that marks the beginning of the traditional New Year. Muhurat means ‘Auspicious hour’. • Muhurat trading is one of the oldest customs at the stock market and is practiced with utmost fervour.
Traditions on Muhurat Day • Stock exchanges and broker offices wear a festive look as they deck up to seek the blessings of Goddess Lakshmi. Stock Brokers and their families come into their offices to perform puja and trade during this auspicious period. • For the business community, the new financial year begins with Diwali as they perform the ‘Chopda’ or Sharda Puja where old account books or Ledgers are closed and new ones open marking the start of a promising new business year.
Muhurat Trading Practices • Investors place token orders and generally book profits during Muhurat trading. • Volumes are usually very thin as most are only making a symbolic purchase. Most traders choose to buy on this day as it is considered positive. • Along with the stock exchanges, Commodity exchanges also have investors. Mahurat trading for
Historical Performance of Markets • Markets generally tend to end on a positive note on Diwali day, even if by a small margin. • Since 1992, the Sensex has ended in the positive 71% of the time with an average gain of 1% or so on Diwali day . • The Benchmark index ended in the red on Diwali day 29% of the times since 1992, with an average loss of less than a percent.
Significance of Muhurat Trading • Historically, correlation there between is returns little on Muhurat trading and stock market movements over a long-term period. • Trading on Diwali day is a tradition with most transactions having more of a sentimental value than a real portfolio benefit.
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