Do’s & Don’ts for Muhurat Trading

By Vikas Singhania, CEO, TradeSmart

During Muhurat Trading, you always need to stay cautious and alert with what you need to follow and what not, keeping a safe play on hand! During this time, there is a huge influx of IPOs as business firms desire to capitalize on the auspiciousness of the occasion and cash in on the eagerness of the investor community. But there are certain Dos and Don’ts to follow to avoid any loss and earn good through wise tricks of trading. Here is a breakdown to help you make a wise choice leading to measurable profits.

Dos for Muhurat Trading

• Token Purchases

Both as a symbolic gesture and as a means of entering the equity market, you can make a token purchase of an initial investment that can bring prosperity and a decent return on investment. This is deemed the right time for the new investors as well, to enter the equity market for practical purposes.

This is mainly because the market is, typically, less volatile on the muhurat trading session due to the trend of traders preferring to buy stocks rather than selling them off.

• Invest In Blue Chip Stocks

Another important thing to do for Muhurat Trading is to buy reliable and quality stocks. While most of the large-cap stocks usually trade at higher valuations, especially during this time, it is advisable to add durability and stability to your portfolio by choosing blue-chip stocks for the long term.

• Portfolio Restructuring and Optimization

Diwali time is also deemed ideal for reflecting on the year gone by and making new beginnings. Investors are encouraged to assess the performance of their portfolios and reshuffle based on new goals and investment horizons.

You can also look to diversify your portfolio by looking at stocks of consumption-based companies. By identifying the right sectors (for example FMCG) and/or sub-sectors (like rural consumption) that have been riding on double-digit growth rates, you can pick stocks with a longer term of investment in mind.

Before proceeding for Muhurat Trading, one should research about the companies that act as inputs (raw materials, production enhances, tools providers) to the consumption-based sectors, as the potential for growth in such companies is deemed higher. These could also include associated logistics suppliers.

Now let’s discuss what are the don’ts for Muhurat Trading

Don’ts for Muhurat Trading

• Don’t Place Large Orders

The Muhurat trading window is rather short (lasting about 1 hour) and there is always a liquidity constraint. Hence, you must avoid placing any large orders.

• Don’t Lose Focus

It is easy to get carried away due to the excitement of the moment and the occasion. This is why I would recommend you to stick to the basic principles. An auspicious day does not automatically translate to assured gains. Follow the above-provided list of dos and stick to token purchases with a consideration of the long-term investment period.

• Avoid Falling Prey to Rumours

As should always be the case, each investment must be backed by careful research and sound consultation. Never allow rumours, speculations, and unverified tips to guide your choices while investing in stocks or any nature.

Another significant don’t for Muhurat Trading involves avoiding trading in Options.  This is a high risk instrument and the possibility of losses are likely to leave a bitter taste in the portfolio. Each investor should weigh in all the pros and cons and then head towards trading instruments that suit his requirements the best.